The interplay between Microsoft’s Xbox console, Windows 8, the Windows games store, SmartGlass, and hybrid laptop/tablet devices has certainly jumbled the rumor mill for Microsoft products a bit. Back in June, just before the announcement of Microsof’s Surface tablet, a rumor popped up that the company would be announcing an “Xbox tablet” featuring gaming and heavy Xbox 360 integration. That rumor fizzled in the “excitement” surrounding the Surface, but it appears Microsoft may actually have been working on such a device.

The Verge today is reporting that Microsoft is building a 7-inch Xbox-branded gaming tablet. The report cites multiple unnamed sources “familiar with plans within Redmond” as confirming the device and stating that it will include an ARM processor. In fact, the report states that most of the specs for the device leaked in June are correct. It will run on a “custom Windows kernel” instead of Windows RT, and the focus of the tablet will be gaming.

The rumors of an “Xbox Surface” are intriguing because of the timing. If Microsoft really is working on the final implementation of the device, that means it will appear sometime in 2013, when next-generation Xbox and PlayStation consoles are also expected to appear. If history repeats itself, Nintendo may be leading the way in changing the way gamers play. The Wii U includes a tablet designed to function as a controller, as well as provide remote console and augmented-reality gameplay for the console. If Microsoft is looking to provide a similar functionality for the Xbox 360 or Xbox 720 while also entering the mobile gaming market in a big way, a low-priced 7-inch Xbox tablet would certainly be a good start.