File this one strictly under the rumors heading, but it seems Microsoft is ready to acknowledge what the rest of the world already knows … the Zune is garbage. The big M is not giving up on the product though, and has plans to release a new version of the Zune this August. Gizmodo overheard this juicy tidbit today at the Game Developers Conference, and while it’s about as far from confirmed as you can get, it makes total sense. The Zune was practically DOA and was plagued by terrible reviews after its release. Recent accusations of cracked screens haven’t helped public perception of the product either.

Evidently, Microsoft is intent on creating space for their product in the portable device market, much like they have in the console world with the XBOX. Oh, and like the XBOX, the new Zune is going to play games. The first one was just practice folks, because Microsoft is in this for the long haul. Captain Obvious should be here for this one.

[Via Gizmodo]