According to the industry insiders close to the Inquirer, Intel is rumored to be pursuing Microsoft quite aggresively, with the intent of putting its upcoming Larrabee chip inside Microsoft's next XBOX console. Yes, you read it rigt -- Microsoft's next-generation XBOX console -- already.

In a related development, AnandTech predicts that Microsoft is already planning for the next Xbox console -- let's call it the Xbox 720.

For a historical perspective on this timeframe, recall a Peter Moore interview -- March 2007, with the Electronics Gaming Monthly magazine. Back then Peter Moore was the head of Interactive Entertainment Business division for Microsoft (he is now gainfully employed by EA), he had indicated that the production team was already working on next-gen Xbox. Fast forward to June 2008 when Robbie Bach, president of the entertainment and devices division at Microsoft also indirectly confirms that people were already working on new technologies.

As per the rumour yarn currently spinning, Microsoft will officially announce their next console come end of 2009. During the first quarter of 2010, Microsoft will finalize the components to be included in the console. Incidentally, the year 2010 happens to be a 'Tock' phase as per Intel's 'Tick Tock' model wherein Larrabee's refreshed version built on a 32nm process can be expected.

The first Larrabee version will be able to directly tap Microsoft's DirectX and Apple's Open CL API, without needing any special go-between software. This would imply that Larrabee will be compatible with all current games. However, new instruction sets such as the Advanced Vector Extensions for Intel's 32nm process chips 'Sandy Bridge'. Larrabee is also expected to have computing power in the teraflop range.

Furthermore, the next Xbox will feature HDMI output as well as WiFi but might not use the Blu-ray disc format for its game media; instead opting for a high-capacity proprietary optical disc format. This next-gen console will also be compatible with the Xbox 360 game line up and will come with 60GB, 120GB, and 200GB hard disk variants.

Even Xbox Live will get structural changes -- like an extensive music download service along with movies and TV shows. The next XBOX consoles in 60GB, 120GB and 200GB versions would be available for $299, $399, and $499. It will be released in 2011 where it might compete with the Sony PlayStation 4.

While all of this looks like so much speculation, it would be interesting to see if Intel does pursue Microsoft for adopting Larrabee. It would be a wise move on Intel's part as such a deal would instantly make the Larrabee a must-support processor for game developers and would put Larrabee on both the PC and the console maps.