Yes, their Surface tablet is launching at the end of this month. Unfortunately it is way too high in price. I'm not sure how they're going to compete with tablets that are half the price of the Surface.
With so many handheld devices on the market, Microsoft may be a little bit reluctant. If given a choice between a handheld console and a tablet, which will you choose? Most people would choose a tablet. I bet if Microsoft would ever release a handheld device for gaming, it would look a lot like a tablet and function a lot like one too.