Hold on to your iPods everyone (Nano for me), I just read in WiRED that Microsoft is readying it’s new portable entertainment device. As much as I love Windows XP and my Xbox 360, this is going to be a tough hill to climb. iTunes is pretty unstoppable right now … but I’m sure someone said that about Nintendo, too, and look where they are. Atari? K-Mart? The big polka worship trend? All drown in the same boat. Here’s a clip of the news.

Microsoft said on Friday it plans to release a new music and entertainment player and accompanying software under the “Zune” brand this year, in a belated attempt to challenge the dominance of Apple Computer’s iPod player.

Microsoft confirmed the plans for an entertainment device and software in a statement after touting those products to record companies in recent months.

The world’s largest software maker faces an uphill climb in closing the gap on Apple’s iPod media player and iTunes Music Store, the runaway leaders in their respective areas.

Now if it could play games … so like a PSP/iPod hybrid … well, then …