Microsoft to drop hard drive for next Xbox?

A couple of weeks ago, M-Systems announced that it had signed a deal to provide flash storage products for Microsoft's next Xbox console. The announcement fueled rumors that Microsoft's next console would not include a hard drive, which M-Systems' CEO appears to have confirmed in this interview:
Q: What’s happening with the contract with Microsoft (Nasdaq: MSFT) that you reported a week ago? How much money is involved?

”It’s a cooperation agreement. The potential isn’t clear, but it’s in the billions of dollars. Microsoft has taken the hard disk out of its Xbox. The only thing left will be a CD; that’s all. At some point, when users want to save their e-mail messages, copy music, or anything like that, the only storage they’ll have is what we give them. It’s worth hundreds of millions to the company, spread over a few years, and we’ll be the main supplier for it; and I hope the sole supplier.

Microsoft hasn't formally announced the specifications of its next Xbox, but M-Systems' CEO seems pretty confident that the console will rely on external storage products.
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