Not surprising that they would think that.
An Xbox handheld that isn't MS's equivalent to a Steam Deck will fail. Which means, if Microsoft otherwise keeps Xbox hardware (which would now include a handheld) on the traditional console business model, particularly with the quirks Microsoft have introduced in their own ecosystem over the years, it will fail.
Why? Because it would still be plagued by many of the problems the Series S & X have. The games are still Day 1 on PC, and Microsoft puts all their games on Steam. Valve has the Steam Deck, which can play all of those games plus plenty others (including many games exclusive to Steam). So in that sense an Xbox handheld that's still a closed box, and does what the Series consoles currently do just in a handheld format, has little value compared to the Steam Deck, which has the added bonus of being usable as a Linux computer when docked (signaling what an Xbox handheld
should be, i.e a Microsoft Windows gaming handheld). Don't even get me started on how poorly it'd fare against Nintendo.
If it's meant to be a hardware extension allowing Series X and S games to be natively played on-the-go, similar to the PlayStation handheld rumors, then no one should expect it to suddenly have an explosion of sales. Such a handheld would still be mainly appealing to people who already have a Series X or S console, which doesn't have the largest or healthiest install base. And again, it would still suffer from the Day 1 on PC problem, meaning it still has to contend with devices like the Steam Deck, ASUS Rog Ally etc. while lacking the general-purpose PC benefits those devices provide.
If it's meant to act as a Game Pass pusher, that inherently means it'll be heavily focused on streaming. Meaning, it wouldn't have a lot in terms of power, which would make you question the rumor that it (even if a dockable) and the home console variant (pertaining to that rumor) would have the same power capability, especially if Microsoft are using AMD again for the GPU side of things. If they would in fact have the same power, then either the "beefy" home console would be something between a One X and Series X in terms of raw compute power (which would mean the dock portion of the dockable handheld would have the same power so...why make two models doing the exact same thing more or less?), or be even weaker than that.
The only way an Xbox handheld that's functioning in the confines of a traditional business model console-wise can succeed, is if Microsoft undo their Day 1 PC policy, at least for the majority of their games, and cut back on a good number of their ports to PlayStation & Nintendo systems too. And they'd have to marry that with aggressive free perks and discounts, etc. of their games to Game Pass subscribers on console. I won't 100% rule out that's something they actually do, but you can imagine the shitstorm it'd cause not even with PS & Nintendo gamers, but especially PC gamers, not to mention it'd run completely counter to all the messaging Microsoft did in the media and for regulators the past two years. It might even directly violate a lot of the contractual agreements in place and concessions they agreed to for ABK.
In short there's like a 5% chance at best they do something that drastic, even if that would be the surefire way to make Xbox consoles and a handheld operating on the traditional model, find actual success. Therefore chances are this handheld, if it exists, is way more likely to be a Microsoft Gaming/Windows handheld/dockable and probably part of a push for Microsoft gaming hardware that's much more PC-centric in the business model, and competing as gaming-specific Windows devices in market segments like mini-PC NUCs, portables, laptops etc. that Microsoft and 3P OEMs would make customized variants of, running an Xbox-like gaming frontend and also functioning as full Windows machines.
That's something which not only fits with their "pro-consumer" messaging the past couple years, and not only fits in with the rest of the corporation's operations, but also gives new hardware some actual market appeal (and higher/better pricing to have good profit margins off the hardware sales directly).