MacRumors.com

Last week, a Bloomberg story cause some excitement with claims that Microsoft was planning to release an iPod rival by Christmas of 2006. The new digital music player was said to include a wireless Internet connection allowing users to wirelessly download music. Microsoft is already meeting with Hollywood and music companies to license content for the upcoming device. (A photo has also been posted that claims to be a development model of the device.)

Steve Jobs predicted in January that due to the lack of iPod competitors, that Microsoft was "going to have to get into the hardware business of making MP3 players". Currently, Microsoft relies on 3rd party manufacturers to develop around a common hardware specification.

This week, more information about the upcoming Microsoft device was revealed. According to the Seattle Times article, Microsoft is actually developing a line of Xbox-branded digital media devices. The project is called "Argo" and under the Xbox development group.

What's being developed is actually a complete line of Xbox-branded digital-media products, including a device that plays media, a software media player and an online media service.

This would represent an more "end-to-end" business model described by Walt Mossberg that has brought Apple a lot of success with their Music Store/iTunes/iPod integration.

Meanwhile, Piper Jaffray analyst Gene Munster believes that Apple will release their own wireless iPod this fall and do not believe "the yet-to-be-seen Microsoft offering will be a worthy opponent for the iPod".