Microsoft impresses with X-box video game console

Bill Gates on Friday showed a prototype of the "X-Box," the
software company’s first video game console, which is expected to reach stores
in the fall of next year. The X-Box is an x-shaped aluminum contraption that is
built around a custom-designed 600 MHz Intel Pentium III processor and an Nvidia
graphics processor that generates images at 1 trillion graphic operations per
second (about 300 million polygons per second), three times the speed of the
Sony PlayStation2. The X-Box also includes 64 megabytes of memory and an
eight-gigabyte hard disk drive, a DVD player, and a 10 or 100 megabit Ethernet
controller card.

The X-Box is expected to cost around $300. All that hardware power added up
to an impressive demonstration, as Gates showed off the console's movie-quality
graphics capabilities, with butterflies flying over a Japanese pond. Sounds and
movement had none of the pauses that often occur with processors on other game
consoles or PCs. "This is a huge milestone," Gates said at the Game
Developers Conference in San Jose. "It's a new platform for the industry,
and we are looking forward to see what you will be doing with it. One key
element that is crucial is making it fun, making sure that people are
entertained by what they do."

Gates appealed to the more than 2000 video game developers in the audience
saying his company needs their best effort to take what's in this platform and
create amazing games around it. "The X-Box will create a new gaming
landscape. Microsoft is totally committed to making the X-Box the most
successful game platform everywhere." Already the Microsoft move appears to
have thrown the marketing plans of Nintendo off course. Right after the
Microsoft X-Box announcement, Nintendo said it is delaying the North American
and European launch of its forthcoming Dolphin system to the first half of 2001.

Analysts remained skeptical of whether Microsoft will be able to push its way
into the highly competitive videogame market. "It's going to be interesting
to see whether this X-Box will have any success, because the games market is
highly competitive. It makes sense that if Microsoft wants to be part of every
aspect of computing they would get into consoles. Whether or not it will be
successful is another question," said Daniel Kusnetzky, an analyst with
research group International Data Corp.

Sony officials kept a stiff upper lip in the face of the potentially
formidable competitor. "As the worldwide leader, we welcome the competition
from Microsoft. This is a very exciting lucrative market. We are very flattered
that a company as big and respected as Microsoft is going after us in this
market," said a spokeswoman for Sony Computer Entertainment of America.

Gates said Microsoft plans to roll out the X-Box with a massive advertising
and marketing campaign that will have a budget larger than that of the Windows
95 OS on which Microsoft spent several hundred million dollars. Microsoft has
worked 16 months on the X-Box, which will represent the company’s first major
hardware product. Microsoft other non-software products include accessories such
as keyboards, computer mice, and joysticks. The X-Box is but the latest in a
series of moves aimed at lessening Microsoft’s dependence on the PC operating
systems software. That market is maturing rapidly and is becoming subject to
more competition from both Unix and Linux camps. Microsoft needs to leverage its
technology to new markets, including set top boxes, Internet appliances, and
mobile communications devices.

Certainly, the $20 billion videogame market offers a rich opportunity and may
prove important as the computing power of game devices is fast rivaling that of
personal computers. The X-Box, which uses Microsoft’s ActiveX technology will
enable Microsoft to encourage the legions of Windows application software
developers to produce games for the X-Box. A lack of good software games have
always plagued the video game industry. But the X-Box may encourage developers
to invest in title development as they will be able to easily port the titles to
the desktop OS platform.

Analysts were quick to point out that while Microsoft may be a newcomer to
the game console market, the company already is a formidable player in the game
market. Microsoft’s "Age Of Empires II: Age of Kings" game was the
fourth biggest seller in 1999, while "Flight Simulator" has been a top-10
seller for more than a decade. X-Box is designed to connect to DSL and other
high-speed Internet services, said Robert Bach, a vice president in Microsoft's
Home and Retail Division. That will give the device the ability to let users
play games over the Internet, read and write e-mail and surf the Web.