Microsoft chairman Bill Gates on Saturday unveiled his company’s new rival to the Sony PlayStation 2, the Xbox, which Microsoft hopes will give it both entry and an immediate lead in the games market which was valued at $10 billion last year and is expected to reach $20 billion in 2002.

The development of Xbox represents a major diversification for Microsoft from its core software business.

"Xbox is on track for an awesome launch in fall 2001," said Robbie Bach, senior vice president and chief Xbox officer at Microsoft. "With more than 200 game companies around the world creating Xbox games for launch and beyond, the unveiling of the Xbox design is just the start of great things to come."

The Xbox will be powered by an Intel 733MHz processor, 64MB RAM and an 8GB hard drive for the storage of game information. It will also contain an ethernet port for fast on-line gaming via a broadband connection and a graphics processing unit that Microsoft claims will deliver more than three times the graphics performance of Sony’s PS2. Like its Sony rival, Xbox will play DVDs.

Xbox is also backed by a $500 million marketing budget to be spent over 18 months and 1,000 Microsoft staff working exclusively on the console. It will launch in Autumn this year in the US and Japan and in Spring 2002 in Europe. No pricing information has been disclosed.

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