Xbox 720
Sources familiar with the company's plans have reportedly said Microsoft's Xbox 720 could debut during the holidays in 2013. IBTimes

Microsoft's next generation Xbox, rumored to be called the 720 and codenamed Durango, is in its manufacturing stages according to IGN. A source told the gaming website that assembly of the upcoming console's hardware has started recently at the Austin, Texas division of Flextronics. The electronics company is also responsible for manufacturing the current Xbox 360 console and the original Xbox.

Flextronics creating a new team of testers to experiment with comprehensive marketing, software, and hardware for the next Xbox, the report indicates. This team was developed before the manufacturing stage was reached. But IGN added that doesn't necessarily mean we'll see the Durango soon.

This rumored production could be the first signs of a development kit, which are consoles created specifically to act as test trials for developers so that they know what they're working with. Microsoft already announced that they would not be debuting a new console at this year's E3, which means that it is highly unlikely that fans will see the next gaming system soon.

Xbox 360 has found new ways to extend its lifecycle like introducing the world to controller-free experiences with Kinect and re-inventing the console with a new dashboard and new entertainment content partnerships, read Microsoft's written statement to IGN. We are always thinking about what is next for our platform and how to continue to defy the lifecycle convention. Beyond that we do not comment on rumors or speculation.

The next gaming Xbox gaming system is said to be seven times as powerful as its predecessor, and will possibly launch in 2014. The Durango is said to be based on the AMD 6000 series graphics, with the HD 6670 as a possible option. This graphics card supports DirectX 11 and 3D at a resolution of 1080p, CNet speculates. Little details have been released about a Kinect 2, but Microsoft recently hired a 3-D specialist, as CNet also reported. This could provide some interesting gameplay variations, especially for Kinect titles. With Nintendo's Wii U boasting a tablet-esque controller, Microsoft may need to add a bit of extra flair (such as 3-D integration) to keep up.

But despite these rumored developments, some say that these next-generation consoles may not fare well in the gaming market.

Analysts at Piper Jaffray Michael Olson and Andrew D. Connor predict an average decline of 53 percent for software sales in the first 14 months of next-generation's cycles, according to Gamasutra. This includes Nintendo's upcoming Wii U and Sony's PlayStation 4. The report indicated that the successor to Microsoft's console will only sell 55 percent of the volume that the Xbox 360 managed to shell out.

Wii U, Orbis, and Durango won't sell as well as Wii, PlayStation 3, or Xbox 360, writes DigitalTrends. It's almost impossible. The real question is: What will be the universal device that people play and buy games on?

Microsoft does seem to be in a hurry to ship out its current Xbox models, as the company just implemented a new package deal that would offer the console along with a Kinect sensor and a two-year subscription to Xbox Live Gold for only $99.