"Project Midway"

That was the not-very-subtle codename Microsoft gave to the first Xbox--and it wasn't referring to the maker of Mortal Kombat. You learn that and other goodies in Sam Kennedy's piece on Dean Takahashi's new book on the making of the Xbox 360. There are also excerpts from the book. Some highlights:

* Microsoft's third party team turned down Grand Theft Auto III for the original Xbox. Oops.

* Xbox 360 was codenamed Xenon.

* "Most of the executives who were in on the planning for Xenon didn't want the hard disk drive in the system. It had been the boat anchor of the original Xbox. The hard disks had started out costing Microsoft about $50 each for every Xbox, a cost that neither Sony nor Nintendo had to carry. It was an albatross."

* "Nintendo had the right to buy all of Rare, but it had to do so before an approaching deadline. The relationship with Nintendo wasn't a good one. Speculation about a split was rife when Rare sent out a Christmas card in December, 2000. On the card was a green Christmas tree with a black box underneath it. On the box was a green X. Once the Microsoft team saw that, they decided that Rare might be worth going after."

The overall picture is of a corporate structure which is incredibly inefficient. If Takahashi's book is anything to go by, Microsoft is going to have a hard time succeeding in industries where they don't have an insurmountable built-in advantage (or where they can simply bury a smaller competitor in money).