A US games magazine claims that it has evidence that Microsoft is already working on a third-generation Xbox console.

EGM has stated that an undisclosed Microsoft Xbox 360 game has been canned and, instead, Bill Gates and his team are now creating the title for the launch of the next Xbox.

Although it is logical that all of the main console players will be planning their next move in the lucrative games business, this is the first time plans of any future systems has been revealed.

But given that Nintendo, Sony and Microsoft have all stated they are keen to extend the life cycle of their current consoles, it is unlikely that Microsoft have any plans for the near future.