Microsoft has already started work on the successor to the Kinect and sources close to the project have confirmed that the Kinect 2 may actually contain an embedded version of the Xbox 360.
The move would not only slash the cost of an Xbox 360 bundle but also allow Microsoft to expand beyond its existing audience.
We understand that the new device will no longer need to be located centrally near the television set although a clear line of sight will still be compulsory for optimum gaming experience; it will also apparently feature a movable pair of cameras on the front.
The reworked gaming console will use a 28nm shrink of the current system on chip, one which will cut power consumption and dissipation and cut costs.
Microsoft went to great length to ensure that the Xbox 360 components are miniaturised to the extreme. The motherboard for example is 75 per cent smaller than the current Xbox 360 and the USB and HDMI connectors are now located in a break-out box.
Engineers have managed to place components on both faces in order to save space and have used some techniques learnt from the mobile industry to cram as much as possible in a space that's the quarter of the volume of the original Xbox 360.
A spokesperson for Microsoft said that they do not comment on unannounced products. The company hasn't yet announced any timeline for the successor of the Xbox 360.