According to Dean Takahashi's new book, The Xbox 360 Uncloaked, the Xbox 360's hardware team have been divided in two: half to work on reducing production costs for the Xbox 360, and the other half is at work on making a portable console (we've blogged about this before). The portable, we've learned, is meant to launch halfway through the life span of the Xbox 360, when sales usually start to decline due to announcements about next-generation home consoles (Xbox 720?).
Will we see any announcements at E3? Highly doubtful, but we would suspect an unveiling at E3 2007.