Microsoft Puts The Kibosh On Xbox Launch Rumors

There's been a lot of chatter the past few months about what Microsoft's next-generation Xbox might look like, as well as repeated speculation that the device could tip up at the upcoming E3 Exposition. According to the head of Microsoft Corporate Communications, Frank Shaw, the company is flattered by the rumors but has no plans to launch a new console generation this year.

“While we appreciate all the interest in our long-range plans for the future, we can confirm that there will be no talk of new Xbox hardware at E3 or anytime soon,” Microsoft’s Corporate Communications boss Frank Shaw told AllThingsD. “For us, 2012 is all about Xbox 360." Sales figures show that the Xbox is selling extremely well, and the company's Kinect has been more popular than Sony's rival PlayStation Move.

Microsoft's reasons for delaying a new console generation, however, go beyond the 360's popularity. The next-generation Xbox will undoubtedly launch with a Kinect peripheral, which means MS has good reason to take its time in the design phase. The company doesn't want to cut the legs out from game developers who took on the Xbox 360's new peripheral -- announcing new hardware at E3 risks the Osborne effect, in which sales of a current system fall precipitously once news of a successor breaks. (ironically, the Osborne effect isn't actually what sank Osborne Computers).

Launching a new console + Kinect 2 could fragment the market around the current version of the device

More broadly, the entire game industry is in the midst of an enormous transition. Mobile phones have stolen most of the market share that handhelds once held, there's a great deal of discussion over what sort of disc media (if any) a next-generation console should support, and Microsoft's own Windows 8 ships with Xbox Live integration out of the box. Microsoft clearly has plans for a combined tablet/Xbox/PC experience, and integrating that capability before releasing a new console generation makes a lot more sense than doing both at the same time.

Finally, there's the question of whether or not existing manufacturing techniques are advanced enough to give Microsoft the sorts of yields and prices it would want. Analysts generally expect that both MS and Sony will take an evolutionary rather than a revolutionary approach this time around and aim for designs that come closer to being profitable on launch day, even if they push the envelope more than Nintendo is likely to do with the Wii U. That means both companies need 28nm yields to be running well. Current evidence suggests this is not the case. AMD HD 7000 28nm parts have been supply constrained, and Nvidia's Kepler is likely to follow a similar pattern when it debuts in the near future. In short, it's better for Microsoft to wait and watch the 28nm game in order to evaluate where best to build its parts and what designs give it the highest yields and smallest die.

Microsoft's decision to wait-and-see also gives the company time to evaluate the Wii U. It doesn't take a genius to see how a Windows 8 tablet with an Xbox Live service could potentially offer some of the same benefits that Nintendo is touting for the Wii U's touchscreen controller. Again, MS isn't necessarily planning anything concrete along these lines, but it never hurts to wait and see what your competition is doing.