The next version of Microsoft's Xbox video game console could be released in the fall of 2005, without the hard drive that was one of the defining characteristics of the current game console.
The console would use three IBM processors based on the new generation of powerful 64-bit computing technology and a graphics chip from ATI Technologies.
The new console would likely be shipped without a hard drive and said it was not "guaranteed" that the new console would be able to play current Xbox games.
By eliminating the hard drive, Microsoft could reduce the cost of production while allowing game data to be stored on flash memory.
Both Microsoft and Sony are expected to divulge more details on the next generation of their hardware in the coming months at industry conferences in March and May. Most in the industry had expected those next-generation systems to come out only in 2005 or 2006.
Microsoft executives have said they do not want to give Sony the head start in the current generation that it had in the last one. Sony's PlayStation 2 came out a year before the Xbox and has built a commanding worldwide lead.
Part of the strength of the PS2, industry leaders have said, is that it is backward-compatible with the original PlayStation. As the Xbox is Microsoft's first foray into games hardware, it has never been clear if the company intended future generations of the console to play old games.
Video game hardware and software sales totalled $10 billion in the US in 2003, though growth is expected to slow in coming years ahead of the launch of the new consoles.