PS3-killing Xbox 360 in development?

Microsoft is developing yet another new version of the Xbox, one which may be designed to counter sales of Sony's PlayStation 3, say inside sources. People within Toshiba -- the primary creators of the HD DVD format -- indicate that Microsoft intends to build a new console with an HD DVD drive built-in, as opposed to just offering an external drive at extra cost. The latter is reportedly selling badly, and one of the primary drives of PS3 sales has been the inclusion of Blu-Ray support, making it one of the cheapest HD movie players on the market at $600 or less.

"An Xbox with a built-in HD DVD drive is critical," a senior Toshiba executive is quoted as saying. "They and we are working on it. It also has to be more than a gaming machine. Microsoft recognize this. A version of the device may also be sold under the Toshiba brand name."

The new console would also have an even larger hard drive than the 120GB model on the Xbox 360 Elite, as well as software spun off from Windows Media Center. A universal accessory port is said to be under consideration, as is a dual HDTV tuner complete with a program guide. A more distant possibility is the creation of an "open chassis" Xbox, which could be fitted into TV sets over 40 inches, while still allowing PC-like drive upgrades.

The Xbox 360 with HD DVD is expected to release in late 2008, or in time for the 2009 Consumer Electronics Show in Las Vegas. [via Smarthouse]