"As part of our long-term strategy to broaden the reach of Xbox and make it accessible to more consumers, we've been working for several weeks with our key partners to make this announcement as seamless and high impact as possible," said John O'Rourke, director of worldwide Xbox marketing at Microsoft.

With its cutting-edge technology, advanced graphics engine, hard disk drive and built-in Ethernet port, Xbox has been globally acknowledged as the most powerful video game console in the world. And with a rapidly expanding games portfolio featuring such titles as Game of the Year** "Halo (TM) ," Xbox has become the system of choice for millions of enthusiasts around the globe. "This new, lower price makes Xbox the best value among all competing video game systems," O'Rourke said. "The best box is now the best value."

O'Rourke acknowledged that speculation surrounding a pending price reduction of Xbox has been pervasive in the last few weeks. "The traditional forum for making an announcement of this magnitude is the Electronic Entertainment Expo (E3) next week, but we've been ready to go for some time and can easily put this in place at retail now. We see no reason why eager gamers should have to wait a week to benefit from this tremendous value opportunity."

"Xbox has been working closely with us to roll out this new pricing. We're confident the planned marketing and promotional support behind it will really drive store traffic and bring Xbox to the attention of a lot more gamers," said Dan DeMatteo, president of GameStop.

In just six short months since its highly successful North American launch, Xbox is experiencing a software attach rate of 4.1 in North America, the highest of any video game console ever. And recent momentum in Europe and Australia demonstrates strong consumer demand for Xbox.

Microsoft currently expects to ship 3.5 million to 4.0 million Xbox consoles for the fiscal year ending June 30, 2002. The company is not providing any update to financial guidance provided on April 18, 2002.