The news comes just days after Microsoft said it would miss its fiscal year-end sales target for the Xbox by as much as 40 percent, a shortfall it blamed on weak sales. Those weak sales led to deep price cut in Europe and Australia last week.

Blackley's spokeswoman said he would not be ready to discuss details of the new venture for another two weeks at least, and she gave no indication as to what type of business the new company will pursue.

Blackley, a physicist by training, worked at the video game arm of Hollywood movie studio DreamWorks before joining Microsoft as head of the company's Advanced Technology Group. He has been one of the Xbox's public faces from the start, even going so far as to propose to his fiance during the Xbox's launch on Nov. 15 in Times Square in New York.