Discussion with our hard drive vendor sources seems to confirm the speculation that we have been hearing from other sources. Microsoft will transition from the current 120GB hard drive to a 250GB model.  The decision, according to our storage gurus, has more to do with the evolution of the 2.5-inch hard drive form factor and areal density improvements than perhaps a desire by Microsoft to add additional storage.

From what we have been told, the older design of the 120GB hard drives that have been in use by Microsoft was based on a design and platter density that is no longer in use. Simply put, the manufacturer can offer Microsoft the larger 250GB drive for the same cost or slightly less than they were paying for the 120GB model. It is expected that the 250GB model will use a single-platter design which, of course, is cheaper than previous two-platter designs that were previously used in some drives.

The decision will also combat the 250GB offering that Sony has in the higher priced PlayStation 3 configuration. Rumors have been abundant over the past six months that Microsoft was planning to revamp their storage offerings with a larger hard drive to be offered, as well as a larger memory card. In order to keep costs low, Microsoft is forced to contract for very large numbers of hard drives to fulfill the need for both Xbox Elite consoles being built and to be built, so it does stand to reason that they will have to work through remaining inventory before offering the larger model.

To celebrate the Call of Duty: Modern Warfare 2 and Forza Motorsport 3 launches, Microsoft offered what has been referred to as the “Super Elite” console bundles, which include a 250GB hard drive. At the time of launch Microsoft confirmed that they had no plans at this time to offer a 250GB hard drive option beyond offering it with these Xbox 360 Super Elite bundles. The key phrase was “no plans at this time,” which did not rule out the possibility of offering the 250GB drive as a standard and as an add-on drive in the future. Expect the official word in the next couple of weeks.