Even though Microsoft Corp. officially declined plans to release a version of Xbox 360 with integrated HD DVD drive, the company may still be working on such device, Taiwan-based media reports.

A news-story by DigiTimes web-site states that Microsoft had started designing a new-generation of Xbox 360 game consoles equipped with an internal HD-DVD drive and was selecting manufacturers in Taiwan to build the drive. The actual gaming machine is expected to come out in the first half of 2007, if all proceeds well. The external HD DVD drive, however, is likely to be available in a couple of months time from now.

Back in July, 2006, Toshiba, the main driving force behind HD DVD standard, said that Microsoft would release an Xbox 360 flavour with built-in HD DVD drive. However, at that time Microsoft denied such possibility, claiming that it would offer external new-generation optical drive for those, who demand it only. Moreover, even though offering external drive is not very cost-efficient, it provides Microsoft flexibility to transit Xbox 360 to Blu-ray disc, if the standard becomes significantly more popular than Microsoft-backed HD DVD.

“We feel that offering the drive externally is the best way to give consumers the ultimate choice to create their own high definition experiences. We have no plans to release the Xbox 360 with an internal HD DVD drive,” a Microsoft spokesperson is reported to have said.

It would not be logical for Microsoft to release Xbox 360 featuring HD DVD optical drive, as all the content for the Xbox 360 game machines is made on DVDs and extra capacity provided by the HD DVD will either not be used, or the games developed for the new console flavour will not work in all their glory on the older machines. Historically, game console makers never released more advanced versions of game consoles after the initial release, as game developers would have to alter their titles to take advantage of the new technology.

This time Microsoft did not comment on the news-story.