The new device is planned for Thanksgiving and Christmas sales, said the people, who declined to be identified because the product road map is confidential. The software maker hasn't decided whether to unveil the new Xbox at an industry event such as the E3 show in June, or a separate event devoted solely to the machine, one of the people said.
The new version will debut a year after Nintendo Co.'s brand-new Wii U, which went on sale Nov. 18 in the United States. Sony is also readying an update to its PlayStation console. In the meantime, Microsoft is still trying to squeeze out sales of of the current model Xbox 360, selling 750,000 over the week around Thanksgiving, surpassing company expectations.
That was almost twice as many shipments of Nintendo's Wii U console, which went on sale that same week. That device, the first major new console since 2006, is a high-definition machine offered in two versions costing about $300 to $350 with a 6.2- inch (16-centimeter) touch-screen controller called the GamePad.
Microsoft Xbox spokesman David Dennis declined to comment yesterday.
While Xbox 360 had a strong Thanksgiving week, there are signs the console market is overdue for updates to boost sales, which have been declining. U.S. retail sales of video-game software, hardware and accessories dropped 25 percent in October from a year earlier to $755.5 million, according to researcher NPD Group Inc. While Microsoft has led in console sales in the U.S. for the 22 months through October, its monthly sales have been declining, NPD said.
Since the release of the Xbox 360 in 2005, the gaming market has changed, as casual games played on tablets and phones gain in popularity. Microsoft introduced full-body motion controls to console gaming with the Kinect. More than 40 million of the 70 million Xbox 360 customers also have Xbox Live online subscriptions, many of which are used to watch TV and movies, rather than play games.
Microsoft shares fell 1.5 percent to $26.56 at 12:53 p.m. in New York, making it the worst performer in the member- weighted Dow Jones Industrial Index. Through yesterday, the stock had gained 3.8 percent this year.