Microsoft's next-generation console, codenamed Durango and known among fans as the Xbox 720, could already be under development at a Flextronics facility in Austin, Texas.
That's the same company that currently develops the Xbox 360, so it would make sense for it to be the one putting together the first of the next-generation. Purportedly the firm has already created a test group that was focused on marketing, software and hardware tests for the Xbox 720.
Unfortunately for fans hoping that this means a 2012 release, these are most likely development kits being produced. Considering we've seen rumours of Nintendo Wii U and Sony PS4 Orbis systems popping up at select developers, it makes sense that Microsoft would be doing the same - though it would seem to be behind the other two console competitors if this is the first production run.
Microsoft's official response to the rumour is as you would expect, non-committal and full of nothing, so for now this will have to remain speculation.
With just a year and a half to go until the expected release of the Xbox Durango, production of titles and hardware will certainly be ramping up over the next few months.
Especially with Nintendo expected to show off its Wii U at E3, an event that is likely to capture the attention of many a gamer, whether they are fans of Nintendo or not.