Did you think Microsoft was going to let Apple have all the fun?

Confirming weeks of speculation, Microsoft has officially announced the Zune HD. The specs -- a 3.3 inch OLED touchscreen, the ability to output in HD, an HD Radio receiver, a full-screen web browser and built-in Wi-Fi -- are pretty impressive, but perhaps the most exciting tidbit is that the Zune marketplace will be fully integrated into Xbox and Xbox Live as a replacement for the current Live video service.

That's a huge step for Microsoft, who until now have oddly kept the Zune and Xbox brands on opposite side of the room. With one move, they'll be exposing the Zune to about 17 million customers who are already using a piece of Microsoft hardware. Moreover, those 17 million are also gamers, and the Zune HD's combination of touchscreen capability, Wi-Fi access and robust marketplace seems the perfect recipe for a move into the handheld gaming space.

Microsoft seems to feel the same way. In an interview with Develop, Chris Stephenson, GM of consumer marketing for the TV, Video and Music Business at Microsoft, all but confirmed that gaming is definitely on the agenda.

"Gaming is a big opportunity for us," he said. "We’re not announcing the specifics around our gaming plans for Zune HD right now, but it is definitely an area that we have done some work in...there is clearly a great opportunity for us to be a major player in that market."

The Zune could certainly use a boost. Sales of the system have waned in recent months, and as Apple's iPhone/iPod Touch continues to gain traction as a legit all-in-one entertainment device, the Zune has been looking more and more like a somewhat stale, expendable piece of hardware.

To counter that, Microsoft will be including the system in its presentation at next week's E3 gaming convention in Los Angeles, noting that "attendees will see firsthand how Zune integrates into Xbox LIVE to create a game-changing entertainment experience." Is a sizzle trailer of some Zune HD games asking too much? We'll find out soon enough.