Rob Fahey 17:53 (BST)
30/06/2005

The operating system which drives the Xbox 360 may be licensed out for use by third parties, according to company chairman Bill Gates, suggesting that it may become part of the firm's range of software for embedded systems.

Speaking in Japan, Gates said that the firm was considering offering the software - which offers extensive media and network functionality, and may allow users to download movies and music over the internet - to other companies.

His comments were confirmed by a Microsoft Japan spokesperson, who told the Associated Press that the arrangements being considered by Microsoft would be similar to the way the company sells the Windows operating system to PC manufacturers.

However, the spokesperson did point out that Gates was referring to just one of the options currently being considered by Microsoft - and no decision has yet been reached on the subject.

While some commentators have interpreted Gates' comments as an indication that the company may allow other firms to manufacture Xbox 360 compatible devices, the reality is likely to be somewhat less dramatic.

Microsoft has invested significant cash and resources in developing the operating system and user interface for the Xbox 360, which are designed not only to play games but also to provide for communications between Xbox Live users, content downloads, music, movie and photo management and playback, and interfacing with portable devices, Windows Media Centre PCs and possibly even online music and movie stores.

That same functionality, or a sub-set of it, would be very attractive in a large range of consumer devices - and this is an area where Microsoft's existing Windows XP embedded product is currently facing strong competition from systems based on the free Linux operating system, while rival Apple is also thought to be planning an entry to this market.