Microsoft may introduce game console in autumn

Microsoft, determined to head off Sony in the battle to control digital entertainment, is considering a move that could shake up the video game market, industry executives said.

Microsoft may pour billions of dollars over four years into developing and promoting a home video game console, code-named X-Box, said one person who has been briefed on Microsoft's plans. Microsoft's proposed machine, a hybrid akin to a PC that plugs into a television to play games, is expected to be manufactured to the company's specifications by PC makers or subcontractors.

The Playstation 2 is the focus of a multibillion-dollar investment by Sony and could become potent competition for consumer PCs that use Microsoft software and also digital boxes on top of TV sets, such as Microsoft's WebTV system. Sony's machine will be able to run high-quality three-dimensional animations, play digital video disks, connect to the Internet and store data in accessory hard disk drives. The new Microsoft console is expected to play standard PC games, also with movie-quality animations.

Door to the living room

The brewing battle between the two companies reflects a growing convergence of industries, as game systems grow up to be full-fledged computers and PCs try to break into the living room. With all of Playstation 2's new capabilities, Microsoft is believed to be worried about possible defections by PC-game developers, some of whom could shift plans for new products to the Playstation 2.

"Microsoft needs to make a statement to keep the game developers and PC consumers loyal," said Rick Doherty, an analyst at Envisioneering Group, a Seaford, N.Y., consulting firm. "Everyone can see there are 60 million Playstations out there and 20 games apiece that go with them. Sony has proven that the video game business model works tremendously."

A Microsoft spokesman and Sony spokeswoman declined to comment. Whether Microsoft's box would be marketed by the company under its own brand name, that of manufacturing partners or both isn't clear. Executives at software makers and PC manufacturers said they have been briefed by Microsoft on the X-Box but knew of no hardware companies that have decided to make or sell it.

It is possible that Microsoft, which has mounted abortive efforts to get into home entertainment devices before, could back away from the idea. In August, one Microsoft executive, who requested anonymity, said X-Box may be killed because of the "opportunity to lose hundreds of millions of dollars in the hardware business." Still, Microsoft has continued to pursue the project.

More bang for the buck

At an expected price of about £179, the X-Box seems based on the premise that fast-falling prices of PC components can offer more bang for the buck than Playstation 2. The Microsoft features may include a DVD player, a hard disk drive and extra circuitry suited to fast-moving games and connections to a TV set display.

A software executive Monday described the device as "a console machine with PC innards." People familiar with the situation say Microsoft has decided against using microprocessor chips from Intel, the company's longtime partner in PCs, and is strongly considering using Advanced Micro Devices's Athlon microprocessor. Athlon promises comparable performance to Intel's fastest chips at a significantly lower price. Officials of AMD and Intel declined to comment.

The Microsoft machine also is expected to use a graphics processor called GeForce, from Nvidia, a Santa Clara., chip maker. A Nvidia spokesman declined to comment.

Instead of a conventional PC operating system, Doherty believes that X-Box will use a new hybrid of Windows 98 and a variant of Windows NT that Microsoft designed for non-PC applications. Notably absent is Windows CE, a widely promoted operating system for hand-held computers and other devices that is being used by Sega Enterprises Ltd. in its rival to Playstation 2, the Dreamcast device.

Updating machines One key difference between the X-Box and PCs is that the X-Box's basic components and features won't be modifiable. In the PC business, consumers can update their machines with add-ons that software developers target with new products.

On the other hand, game developers might have an easier time developing for the X-Box since the specifications aren't expected to change constantly. Moreover, such a machine could become much easier to use than a traditional PC, said Omid Rahmat, a games analyst at Doodah Marketing in San Rafael.

The potential competition with Sony has been building for months. Ken Kutaragi, president of Sony Computer Entertainment, has touted the upcoming Playstation 2 not as a simple video game machine but as a connected device that can handle Web surfing, electronic commerce and other chores and that is easier to use than a PC. In one recent speech, Kutaragi said Sony's future lies in "networked digital entertainment."

Bill Gates is like a pushy salesman. If he can get one foot in the door, he'll barge on through. Go to AnchorDesk UK with Jesse Berst for the news comment.