Source: Taiwanese electronics-industry news site Digitimes.

　　What we heard: In September 2005, Microsoft announced it was supporting HD-DVD to succeed DVD as the next video format. Ever since, many have speculated that the software giant was planning a new version of its Xbox 360 console that would have an internal HD-DVD drive. Conventional wisdom was such a device could counter the PlayStation 3's inclusion of an internal drive for Blu-ray Discs, HD-DVD's rival.

　　However, in the intervening year, rumors of a HD-DVD-equipped 360 have largely died down. One big reason was Microsoft's unveiling of an external HD-DVD player at the Electronic Entertainment Expo 2006 in May, which will let 360 owners watch HD-DVD movies when it goes on sale later this year. Another factor was the delay and scaling-down of the PlayStation 3 launch due to problems manufacturing Blu-ray drives--thus eliminating the immediate need for a competing product.

　　Today, though, reports of a HD-DVD-equipped 360 were back in the news, thanks to the Digitimes article. "Microsoft has started designing a new generation of Xbox 360s equipped with an internal HD-DVD drive and is selecting manufacturers in Taiwan to build the drive, according to sources in Taiwan's optical disc drive (ODD) industry," the publication claims. "If the process of selecting partner makers and subsequent certification goes smoothly, Microsoft may launch the Xbox 360 equipped with the built-in HD-DVD drive in the first half of 2007 at the soonest, the sources noted."

　　The official story: When contacted by GameSpot, Microsoft PR reps ladled out their 30 millionth serving of "We do not comment on rumors and speculation." However, they did, in fact, offer some additional comment, saying "Microsoft has been on the record on this issue in the past," and directed editors to a post on Gamerscoreblog.com, the collective blog of Microsoft's Games Global Marketing team. That post, which went up in June, succinctly summed up the company line thusly. "We have no plans to release an Xbox 360 with an internal HD-DVD," it said. "What we showcased at E3 was an external HD-DVD drive, and we're sticking with that."

　　Bogus or not bogus?: Officially bogus. Unofficially? Hard to say. Digitimes has been the source of many interesting rumors in the past--but not all of them have been accurate. In February, the site reported that Sony was planning to release a PSP with 8GB of flash memory by year's end--which now seems highly unlikely.