MS eyes dual SKU strategy for Xbox 720

Microsoft is reportedly preparing to offer its upcoming Xbox 720 console in two iterations.

According to a Digital Foundry report, an entry model will be sold as a cheap, pared down system positioned more along the lines of a set-top box or Kinect-themed gaming portal.

The second version of the Xbox 720 – targeted at core console gamers – would sell at a higher price point and feature backward compatibility, an optical drive and hard disk.

As expected, Redmond’s Kinect controller has also been tapped for a significant upgrade, and will more than likely be bundled with both consoles.

Although it remains unclear when Microsoft will launch its next-gen system, a number of journalists and analysts have speculated that Redmond could make the first official announcement about the 720 at CES 2012.

Nevertheless, Wedbush Morgan analyst Michael Pachter believes the Xbox 720 won’t hit store shelves until 2014.

“Microsoft is still selling a ton of Xbox 360s, and they won’t replace the existing one until sales begin to slow,” Pachter recently told Industry Gamers.

“I think the rumors are based upon leaks about modifying the current Xbox 360 to allow it to operate Windows 8. I fully expect a new model of Xbox 360 by holiday 2012, but don’t think we see a new console altogether from Microsoft until 2014.”

While details about the next-gen console are understandably scarce, MS Nerd claims the 360’s successor will be based on a modded Windows 9 core that uses a Zune HD-like hardware platform. The site describes the platform as “a ‘main’ processor with multiple dedicated assistive cores for graphics, AI, physics, sound, networking, encryption and sensors.”

Interestingly enough, MS Nerd also claims the console – reportedly designed by Microsoft and three partners (AMD, Imagination Technologies & Samsung) – is based on ARM architecture.