Microsoft's Directx Team

In 1998 four engineers from Microsoft's DirectX team, Kevin Bachus, Seamus Blackley, Ted Hase and DirectX team leader Otto Berkes, disassembled some Dell laptop computers to construct a prototype Microsoft Windows-based video game console. The team hoped to create a console to compete with the Sony PlayStation 2, which was luring game developers away from the Windows platform. The team approached Ed Fries, the leader of Microsoft's game publishing business at the time, and pitched their "DirectX Box" console based on the DirectX graphics technology developed by Berkes' team. Fries decided to support the team's idea of creating a Windows DirectX based console.[5][6]

During development, the original DirectX box name was shortened to Xbox. Microsoft's marketing department did not like the Xbox name, and suggested many alternatives. During focus testing, the Xbox name was left on the list of possible names to demonstrate how unpopular the Xbox name would be with consumers. However, consumer testing revealed that Xbox was preferred by far over the other suggested names and "Xbox" became the official name of the product.[7]

The Xbox was Microsoft's first video game console after collaborating with Sega to port Windows CE to the Dreamcast console. Microsoft repeatedly delayed the console, which was first mentioned publicly in late 1999 during interviews with then-Microsoft CEO Bill Gates. Gates stated that a gaming/multimedia device was essential for multimedia convergence in the new times.[8] When Bill Gates unveiled the Xbox at the Game Developers Conference in 2000, audiences were impressed by the console's technology. At the time of Gates' announcement, Sega's Dreamcast sales were diminishing and Sony's PlayStation 2 was just going on sale in Japan.[9]