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Apple appears to be preparing an all-out assault on the handheld gaming market, moving to snap up gaming industry insiders from Microsoft to go with its growing team of graphics-chip specialists.

News that Apple has poached Richard Teversham from Microsoft's Xbox business this week is only the latest sign Apple has gotten serious about the gaming business. Teversham, who was senior director for insights and strategy at Microsoft's Xbox Business, drove the "three year strategy for the Xbox business" in Europe, the Middle East and Asia, according to his LinkedIn profile.

Earlier this week Apple ( AAPL - news - people ) hired Bob Drebin, chief technologist at Advanced Micro Device's graphics group and the creator of the Nintendo ( NTDOY.PK - news - people ) Gamecube's graphics processor.

That move came as IBM ( IBM - news - people ) chip designer Mark Papermaster began his role as head of Apple's iPod business last month after a long legal tussle with IBM.

Apple is also putting some of its huge pile of cash into semiconductor technology. In December, Apple purchased 3.6% of U.K.-based ImagInation, licensing its PowerVR graphics technology. And last year Apple purchased processor designer PA Semi for $378 million (See "Apple Buys Chip Designer ").

Where will those investments be put to work? Apple Chief Executive Steve Jobs said in an interview last year that he plans to put his PA Semi designers to work building silicon for the company's iPhones and iPods. And while Apple keeps its hardware roadmap to itself, iPhone developers such as Damon Allison figure the iPhone and iPod's hardware will evolve in at least three areas.

First, the iPhone will almost certainly get a better camera and multi-media capabilities. That could unleash a new generation of applications that integrate video and still images into games and social applications, as Nintendo's new DSi has done.

Second, sooner or later the iPhone and iPod touch will get a new, faster processor, most likely an ARM-based design customized by Apple's in-house designers. The result will be snappier, better looking games.

Third, Apple will experiment with new form factors, launching a netbook or tablet computer that may use the same software that powers the iPhone and iPod touch. Such a device might be a terrible phone--it's hard to imagine shoving a 10-inch screen in your pocket--but it could be an ideal platform for games and social networking.

Of course, guessing what Apple will do next is a tricky business. The problem with Apple is that while it appears to plan long-term--keeping projects such as its 2005 shift to Intel ( INTC - news - people ) processors under wraps for years-- it says very little about even its short-term plans.

However, talk to a few of the thousands of developers who have flocked to build software for Apple's iPhone since last year and they'll say that Apple's instructions have always been very clear: Build your applications so that they're compatible with different screen resolutions and screen sizes.

"Apple has told us from the beginning to be sure to write our new software in a way that will accommodate different resolutions and screen sizes," Tapulus Chief Executive Bart Decrem says.

Translation: Today's iPhone applications will be appearing on bigger, sharper displays sometime in the future.

And those developers are building applications that are wildly different from the quick and casual games that have appeared on mobile phones in the past.

That's in part because of the device's lack of buttons. Neil Young, chief executive of gaming startup Ngcomo, is betting that the iPhone's touch screen can handle more complex, fast-moving games than are found on today's mobile phones or handheld gaming consoles possible. "You've got a lot more fine control," Young says. "It is a very precise interface."

So he's betting big on a pair of games based on genres that have had mediocre success, at best, on small gaming devices. "Live Fire," slated for later this year, is a fast-moving shoot 'em up. Then there's "Star Defense," a real-time strategy game where players protect a planet from swarming invaders.

Such games are certainly a preview of what's to come as developers continue to explore the iPhone's possibilities. They might also be the best hint at where Apple's hardware could go next.

When the Kindle e-reader first appeared 14 months ago, Amazon-watchers were surprised to see the e-commerce giant redefine itself as a gadget maker. But Tuesday, when Amazon.com released a free application for the iPod and iPhone that allows users to read its e-books on those devices, it cemented its original book-selling mission.

In other words, it's all about the content.

The Kindle software for the iPhone and iPod, which Amazon.com (nasdaq: AMZN - news - people ) Chief Executive Jeff Bezos first hinted at during the release of the Kindle 2 last month, allows users to buy and read any of Amazon 230,000 e-books on any of the three devices and seamlessly move them among the gadgets.

While the software gives up the Kindle's exclusive hold on Amazon's digital catalog, it taps into a potentially much larger audience for Amazon's e-books--Apple (nasdaq: AAPL - news - people ) has sold around 15 million iPhones, while Amazon had sold only around 500,000 Kindles at last count, according to an estimate by Citigroup analyst Mark Mahaney. And that, says Forrester Research analyst James McQuivey, means Amazon has definitively focused on selling e-books above selling e-readers.

"This puts a stake in the ground around the idea that they really want you to be able to access the content you buy from them on any platform. And that's something we haven't seen other major media initiatives do," McQuivey says.

Apple's iTunes store, by contrast, has traditionally sold content tied to its music players--a bid to sell more hardware rather than content. Amazon, McQuivey says, has now made clear it's taking the opposite approach. "Amazon is saying, 'This is about books. We want you to feel that you can read our books anywhere, and we want you to buy more of them,'" McQuivey says. "They're saying, 'We're not a Kindle maker. We're a content provider and a content liberator.'"

Amazon may be liberating its content, but it's not liberating its hardware. Even as the company's book-selling platform expands, it's not likely to become compatible with other content providers. That could give the e-retailer a stranglehold on the budding market for e-books, a strategy likely to rankle publishers.

In an essay for Forbes last month, tech publisher Tim O'Reilly criticized Amazon's decision to close the Kindle to non-Amazon content (see "Why Kindle Should Be An Open Book"). Unless the company opened the Kindle to formats like epub, which work across a variety of non-Amazon-sanctioned devices, the Kindle would become irrelevant in two or three years, he predicts.

With the country spiraling deeper into recession, the Federal Reserve is ready to slash its key interest rate -- perhaps to an all-time low-- in hopes of cushioning some of the economic fallout felt by many struggling Americans.

To battle the worst financial crisis since the 1930s, Fed Chairman Ben Bernanke and his colleagues already have ratcheted down their main lever for influencing the economy -- the federal funds rate -- to 1 percent, a level seen only once before in the last half-century.

The Fed opens a two-day meeting Monday to assess to economy and decide its next move on rates. Another reduction to the funds rate, the interest banks charge each other on overnight loans, is all but certain to be announced Tuesday.

Many economists predict the Fed will cut its rate in half -- to just 0.50 percent. A few think the Fed could opt for an even more forceful action -- lowering rates by a whopping three-quarters percentage point or more. If that larger cut occurs, it would be the lowest on records that track the monthly average of the targeted funds rate going back to 1954.

Even an aggressive rate reduction won't turn the economy around, analysts said.

"It is not so much going to give the economy a big push forward. It's more a case of trying to help the economy from being pushed further backward by all these negative events," said Stuart Hoffman, chief economist at PNC Financial Services Group.

However deeply the Fed decides to cut rates, the prime rate -- now at 4 percent -- for many consumer and small-business loans would drop by a corresponding amount. The prime lending rate is used to peg rates on home equity loans, certain credit cards and other consumer loans. Cheaper rates could give pinched borrowers a dose of relief.

The goal of lower borrowing costs is to entice people and businesses to spend more, which would revive the flat-lined economy. So far, though, the Fed's aggressive rate reductions have failed to lift the country out of a recession that started last December.

Clobbered by the financial crisis, worried banks have hoarded their cash and been extremely reluctant to lend money to customers. Fearful consumers, watching jobs vanish and their investments tank, have sharply cut back their spending, including big-ticket purchases like homes and cars that typically involve financing.

The negative forces have fed off each other, creating a vicious cycle that Bernanke and Treasury Secretary Henry Paulson have been desperately trying to break.

To unlock lending and get financial markets to operate more normally, the U.S. has resorted to a string of radical actions, including a $700 billion financial bailout where the government is making cash injections in banks in return for partial ownership stakes.

In terms of rate cuts, the Fed is getting ever closer to running out of ammunition.

It can lower the funds rate only so far -- to zero. Even if that were to happen -- a point of debate among economists -- the prime rate would fall to 3 percent but no lower.

Against that backdrop, Bernanke says the central bank is exploring other ways to stimulate the economy.

The Fed could buy longer-term Treasury or agency securities on the open market in substantial quantities, Bernanke says. This might lower rates on these securities and help spur buying appetites.

Another option the Fed has mulled: issuing its own debt, which would give the central bank cash and more flexibility to battle the financial crisis. To do that, however, the Fed would need new powers from Congress.

"The Fed wants to show that it has tools and options and is not out of tricks because interest rates are very low," said Michael Feroli, economist at JPMorgan Economics. "The problems holding back the economy are fairly long lived in nature."

To combat the financial crisis, the Fed already has created first-of-its-kind programs, such as getting cash directly to companies by buying up mounds of "commercial paper," the short-term debt firms use to pay everyday expenses such as payroll and supplies.

It also recently launched massive programs to boost the availability of consumer credit, including that for cars, student loans, homes and credit cards. The Fed also is making loans to banks, is providing a financial backstop to the mutual fund industry, and has injected billions of dollars in financial markets here and abroad.

The Fed could opt to expand programs by enlarging loans it's now making, providing loans to other types of companies, or buying more and different types of debt. The Fed's balance sheet has ballooned to $2.2 trillion, from close to $900 billion in September, reflecting some of those other activities to get credit flowing again.

Even with all the bold moves, the economy continues to sink deeper into despair.

Skittish employers axed 533,000 jobs in November alone. That drove the unemployment rate up to 6.7 percent, a 15-year high.

Since the start of the recession, the economy has shed nearly 2 million jobs. Analysts predict another 3 million more will be lost between now and the spring of 2010.

Last week alone, Bank of America Corp., tool maker Stanley Works and Sara Lee Corp., known for food brands such as Jimmy Dean and Hillshire Farm, announced job cuts.

General Motors Corp., Chrysler LLC and Ford Motor Co., meanwhile, are fighting for their survival. GM and Chrysler have said they're in danger of running out of money within weeks. The White House is exploring new ways to help Detroit after rescue efforts collapsed in Congress.

With the employment market eroding and consumers retrenching, the economy could stagger backward at a shocking 6 percent rate in the current October-December quarter, analysts predict. It shrank at a 0.5 percent pace in the third quarter.

President-elect Barack Obama is advocating an economic recovery plan that includes spending on big public works projects to bolster jobs. His plan also includes tax cuts to spur consumers to spend more and businesses to step up investment and hiring.

Americans are sorely feeling the toll of the housing, credit and financial crises.

Households' net worth fell 4.7 percent in the third quarter to $56.5 trillion as people watched the value of their homes and investments tank. It marked the fourth straight quarterly decline, the Fed said.

South Korea's central bank carried out its biggest interest rate cut ever Thursday, slashing borrowing costs by a full percentage point to a record low in a bid to stave off possible recession.

The Bank of Korea said it was slashing its benchmark seven-day repurchase rate to 3 percent from 4 percent during a regular policy meeting Thursday.

It was the fourth time for the bank to lower the rate in the past two months and exceeded the 0.75 percentage point emergency cut on Oct. 27, previously the largest one.

The rate has gone from 5.25 percent to 3 percent since the cycle of easing began on Oct. 9.

The previous record low for the bank's benchmark rate was 3.25 percent last seen in October 2005.

South Korea's economy slowed in the third quarter and economists are predicting it could falter further next year amid global economic weakness.

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