The successor of Xbox, Xbox 360 is part of the seventh generation of gaming consoles. It was developed in cooperation with International Business Machine (IBM), ATI Technologies, Samsung Electronics and Silicon Integrated Systems (SiS). It was released by Microsoft to counter Sony and Nintendo gaming consoles.

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It was unveiled on Music Television (MTV) segment on May 12, 2005.During the planning and development of Xbox 360, it was given many names such as Xenon, Xbox 2 and NextBox. IBM was in-charged to produce the CPU (Central Processing Unit), ATI to work on the GPU (Graphic Processing Unit). The CPU made by IBM is a custom triple-core processor. The first Xbox uses a GPU produced by NVIDIA while Xbox 360 used the chip designed by ATI. While Dolby Digital Sound added a feature that requires games to be at least 5.1-channel Dolby Digital surround sound. The console has a MPEG-2 decoder for video playback, WMV used for streaming video and supports H.263 & H.264 MPEG4 videos. The hardware of the Xbox 360 supports a wide array of SDTV and HDTV resolutions. The early production of Xbox 360 were equipped with a 12X DVD drive but Microsoft came up with a final decision not to include an internal HD DVD player. An external drive can be connected to the console via the USB port. The Xbox 360 features a new array of components and accessories. A maximum of four controllers which includes wired and wireless gamepads can be connected to the main unit.

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With the emerging wireless connectivity, a wireless network adapter is available in the market intended for the Xbox 360. With this features, it shows that Microsoft can also produce a quality gaming console that can compete side by side with Sony Playstation 3 and Nintendo Wii. This is a hardware that can act as a computer and gaming system.