According to Engadget:
This doesn't sound like such a bad idea. I guess only time will tell. If the 360 is as slick as I hear it's going to be then this new tidbit might actually end up being cool. Instead of hassling with trying to fit all your files on a memory card, you can take out the hard drive and just take that over to your friends house.Our same reliable source who delivered the goods for us a few weeks back with the inside dirt that the name for the next Xbox is indeed the Xbox 360 has just hit us up with a couple of other nibblets: One, that the Xbox 360 is definitely going to come with wireless controllers; and two, that it’s going to have an optional hard drive that attaches to the top of Xbox 360 “in a really slick way, almost like the hood scoop on a muscle car.” Better still, “You’ll be able to add the hard drive afterwards without having to take the box apart if you didn’t buy the hard drive version of the Xbox 360.” Yeah, that means there are going to be (at least) two versions of the Xbox 360 available when it goes on sale, one with a hard drive, and one without.
BTW, in case you haven't heard: the 360 is supposed to be amazingly sexy and much more petite.
The real question is: "Why are they calling it the 360?"
It has to mean something right. I mean, they could call it the Xbox 500000000 to make is sound cutting edge. The '360' has to be some integral part of the new box...
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