Microsoft chairman and chief software architect Bill Gates offered the first look at the company's Xbox game console here Saturday, as the giant software maker prepares to do battle against Sony 's Playstation 2 for a slice of the video gaming market. Microsoft's first gaming console is a sleek black box about eight inches square and three inches high, with a large X embossed on the top and a neon green bay at the centre into which DVD disks can be inserted. The company showed two shoot-'em-up video games running on a developer version of the Xbox in a demonstration designed to show off the machine's superior graphics performance. "What you're seeing here is the final Xbox except for a couple of chips that are so state of the art they won't be done until we finish the manufacturing, we'll just plug those in," Gates said, speaking to a packed theater audience at the start of the Consumer Electronics Show (CES) here. "Everything else will be as you see it." Gates confirmed that the Xbox will be powered by an Intel processor and a separate graphics chip being developed by Nvidia. It will have four ports for multi-player gaming, an Ethernet port for playing games over the Web, and a "rumble" capability so that users can feel the action on the screen through the game's controllers, Gates said. "The graphics capability is over three times greater than what's been available before," Gates claimed. When a DVD disk is inserted into the Xbox it takes only 8 seconds for a game to load and start running, he said. Because the Xbox has an 8GB hard drive, games that have been played previously are stored locally and don't have to be reloaded, he added. Professional wrestling star The Rock joined Gates on stage to bring some celebrity to the unveiling. Among the games on tap for the Xbox is the World Wrestling Federation's Raw is War. "To the untrained eye, it might just appear that The Rock and Bill Gates don't have a heck of a lot in common," said The Rock, who likes to refer to himself in the third person, and who momentarily dwarfed Gates on stage. The Xbox is due to ship in the US by the end of this year and in Europe by early 2002. Pricing hasn't been announced, but Microsoft has said its product will be priced competitively with other machines on the market. Sony's PlayStation 2 retails for US$299 in the US. Gates also offered the first public demonstration of Whistler, the codename for the next version of Microsoft's desktop operating system for home and small business users due out later this year. Whistler dispenses with the old Windows 9x code and is based instead on the same kernel as Windows 2000. "By moving Windows 2000 to the (consumer ) PC, we create a machine you'll be leaving on 24 hours a day, a machine that can continue to act as a server for the picture frames, the music devices, the peripherals around the house," Gates said. "Instead of having a disk in each of those devices, you can have one copy stored on your PC." Whistler also attempts to do away with most of the icons that clutter the screen when a PC is first turned on. Instead, the OS presents users with a simple log-in screen that allows up to four users to log on and be presented with their own applications and data. Clicking on one of the log-in names takes the user to a more traditional looking Windows screen. Gates also hosted a demonstration of a forthcoming version of Microsoft's Pocket PC platform for PDAs (personal digital assistants), called Pocket PC Plus. A prototype iPaq PDA from Compaq Computer Corp. was shown that included full voice recognition, allowing a user to create emails or set up calendar entries using voice commands. Until now, a lack of processing power and memory have made speech recognition hard to achieve effectively on handheld computers. Using a wireless connection provided by the 802.11b standard, the device was also used to watch a video clip and listen to music broadcast from a PC across the stage. Gates didn't say when Pocket PC Plus would be released commercially. Gates' notion of the PC as a server for multiple devices echoes remarks made here Friday night by Craig Barrett, Intel's CEO and president. Both executives referred to an "extended PC" era in which they see the PC's value being enhanced by its role as a storage and communications hub for digital cameras, Internet appliances, set-top boxes and other peripherals around the home and office. While they insist the PC will continue to play a central role, both companies have tacitly acknowledged the changing landscape by making substantial investments in other products: Intel in networking equipment and digital music players, for example, and Microsoft in its gaming console, WebTV set-top box and Pocket PC platform. Gates also showed prototype devices developed by Microsoft to illustrate the kind of world people can expect to live in when wireless networking technologies like 802.11b and Bluetooth become commonplace, and if standards like Microsoft's Universal Plug and Play, which allows multiple devices to be linked easily to a network, catch on. The devices included an alarm clock with an LCD (liquid-crystal display) screen and a speaker that was used to play music delivered wirelessly from a PC. Gates acknowledged that an "immense" amount of work must be done to make the digital lifestyle a reality, including improving ease-of-use, expanding broadband networks using cable and DSL (digital subscriber line) connections, and educating consumers about the products available and how to use them. "One of the key elements - and you won't be surprised hearing this from me - is that software is the key" to the digital experience, Gates said.