C|Net is reporting that Microsoft has teamed up with Creative and iRiver to launch devices based on Microsoft's Portable Media Center software, their "iPod killer". Engadget has a photo of the Creative prototype. The Seattle PI has also has an article and a photo of a prototype.
This news really isn't a huge shock. Apple and Microsoft really are the superpowers of the portable audio industry, even though Microsoft doesn't actually make a portable audio device. Truly, it's their Digital Rights Management technologies, AAC and WMA respectively, that are fighting for supremacy. If you buy music from iTunes, you HAVE to buy an iPod. If you buy music from a WMA-based service, you HAVE to buy a player that licensed WMA from Microsoft. Currently this includes just about every player on the market, except the iPod. So this is just another case of the smaller guys lining up behind their big guy for the coming fight.