Microsoft Aims to Put Juice Back in Xbox

NEW YORK ( TheStreet) - Microsoft ( MSFT) dominated the world of computer software not that long ago, and that domination also included their game console, the Xbox.

But, times have changed. What used to be cool to operate on your TV set or monitor is now a whole lot easier to do on your smartphone.

So, today, when Microsoft announces its next generation Xbox gaming system, the world, or at least the gaming world, will be closely watching to see what the Redmond, WA.-based software maker has done to the win back consumers.

In mid-day trading, Microsoft shares were falling 0.6% to $34.88.

The first Xbox was unleashed upon the world in time for Christmas, 2001. It was the first such device made by an American company. It's main competition was Sony's ( SNE) popular PlayStation. Four years and two PlayStations later, Microsoft upped the ante and released the Xbox 360. It was able to take full advantage of Microsoft's Xbox Live online. The Xbox 360 was an instant hit.

Since that time, Microsoft has made improvements and come up with clever peripherals to keep the 360 feeling fresh. But, it's now 2013 and Sony recently introduced PlayStation 4. Add in the popularity of Nintendo's ( NTDOY)Wii and every tablet and smartphone gamer on the planet and you have an entirely different competitive environment for gaming devices.

Microsoft needs to come up with something big - and quickly. Windows 8 was not an instant success. Forget about Windows RT. And despite being a terrific mobile platform, Windows Phone software has not generated enough buzz to translate into a product that challenges Apple's ( AAPL) iOS or Google's ( GOOG) Android platforms.

So today, when Don Mattrick and the Xbox development team gather to unveil their next product we're expecting something new and ambitious. It's rumored that the next Xbox console, nicknamed either "Durango" or "Xbox Infinity" or "Xbox 720", will have an eight-core AMD ( AMD) processor, a super graphics chip, 8 GB of RAM, 500 GB of storage and possibly a Blu-ray disc drive. Microsoft previously avoided Blu-Ray because their competing HD DVD format lost out in that consumer battle.

Expect the new computer box to have full HD video everywhere (including the front-facing camera), a new style controller, provide for augmented reality (similar to Google Glass) as well as be able to (hopefully) understand voice commands. We should also hear about Microsoft's plans for their next-generation, online gaming service.

Microsoft will put all the guessing to rest at 1 pm Eastern, today. You can follow the event live on the Xbox Website. .

--Written by Gary Krakow in New York.

>To submit a news tip, send an email to: tips@thestreet.com.

Gary Krakow is TheStreet's senior technology correspondent.

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