Report: Tweaked Xbox 360 models coming after price cut

August 8, 2007: 9:00 AM ET

The Xbox 360 price cut Microsoft (MSFT) announced this week may be an attempt to clear out inventory ahead of a product redesign. Ars Technica says a source tells them that within a month or two, the Xbox team will offer new boxes with HDMI ports, new chips and quieter DVD drives. [UPDATE: Microsoft has confirmed design changes for Premium Xbox 360s.]

The new Xbox 360 models would look identical to those currently on shelves, aside from a sticker indicating the new model.

Ars Technica classified the information as rumor, since Microsoft has not made an announcement about its plans. But the move would make sense, as Microsoft tries to stabilize a foundering Xbox 360 ahead of a holiday buying season of intense competition with Sony's (SNE) PlayStation 3 and Nintendo's Wii.

Microsoft's troubles with the current Xbox 360 design have given the company's game division a black eye lately. Rampant engineering problems have caused some of the consoles to overheat and lock up; Microsoft has said it will take a charge of more than $1 billion to deal with repairs. Meanwhile, Sony's PlayStation 3 has had its own challenges; its high price (starting at $500) has kept many consumers at bay, perhaps helping Nintendo's Wii console to establish itself as the mass-market favorite.

If redesigned Xbox 360s are indeed on the way, it's not clear whether the new models would inherit Microsoft's recent price cut. After Microsoft lowered prices recently, the cheapest Xbox 360 costs $280, $20 less than it did before.

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