The software company on Monday said it had entered into an agreement that will allow it to use IBM's processor technology in new Xbox products and services. Although details on the next version of the Microsoft video game console remain scarce, the software maker has begun lining up the suppliers whose technology it will need to create the product. Microsoft plans to combine its resources in software and research and development with IBM chips, Robbie Bach, senior vice president of Microsoft's Home and Entertainment Division, said in a statement. "We plan to deliver unprecedented and unparalleled entertainment experiences to consumers while creating new engines of growth for the technology and entertainment industries," Bach said.

The agreement, which is likely to produce a fresh round of speculation about whose processor will win the central role in the next Xbox, gives IBM a hand in the three major game consoles, including those from Nintendo and Sony--even if the extent of its role is still to be determined in two of them. Xbox runs on an Intel PC processor and uses graphics from Nvidia. But Microsoft has already changed one supplier for the next version of the console. The company said in August that it would use graphics from ATI Technologies in future versions of the Xbox. It's possible that Microsoft could also switch processors and use an IBM chip as its main processor for Xbox. However, Microsoft could also use IBM chips to add new features to Xbox or to handle specific tasks, such as communications. More @ CNet