Microsoft already has its own portable gaming console product: the Zune and WP7 devices. The ideal 'gaming phone' would feature physical buttons and a D-Pad, but if you were to design a phone like that it simply wouldn't work, and when you play games on a phone it's usually for a few minutes at the most.

 

Doesn't have to actually be a phone to run WP7 apps, games and applets.