News from the Far East manufacturing world has suggested that, despite the company's previous denials on the topic, Microsoft plans to offer a new model of the Xbox 360 equipped with a Blu-ray drive in order to better compete with Sony's PlayStation 3.

DigiTimes is now reporting that "if" Microsoft adopts built-in Blu-ray disc drives for a new version of its Xbox 360, the price to the consumer will "be lower than the corresponding production costs".

Although the Blu-ray flavoured drives are said to be around $80 more expensive than the current DVD drives in existing Xboxes, it's suggesting that Microsoft will swallow that cost so as to offer the Blu-ray equipped PS3 a run for its money in the console market.

The speculation continues that Sony may well respond with price-cuts of its own, which would obviously only be a good thing for the average gaming consumer.