The console was Microsoft's first product that ventured into the video game console market, after having collaborated with Sega in porting Windows CE to the Dreamcast console. The Xbox first edition was initially developed by a small Microsoft team that included game developer Seamus Blackley. Microsoft repeatedly delayed the console, which was first mentioned 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, confirmed by Microsoft with a press release. 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 was diminishing and Sony's PlayStation 2 was just hitting the streets in Japan.
Concentrating on making a big splash in Japan, Microsoft delayed its European launch, though Europe later proved to be the more receptive market. Two of the original members of the Xbox team, Seamus Blackley and Kevin Bachus, left the company early on. The other founding members, Otto Berkes and Ted Hase, are still with Microsoft, but by 2004 were no longer working on the Xbox project.
Some of Microsoft's plans proved effective. In preparation for its launch, Microsoft acquired Bungie and used Halo: Combat Evolved as its launch title. At the time, Goldeneye 007 for Nintendo 64 had been one of the few hit FPS games to appear on a console, some of other ones being Perfect Dark and Medal of Honor. Halo: Combat Evolved proved a good application to drive the Xbox's sales. In 2002, Microsoft overtook Nintendo to capture the second place slot in consoles sold in North America.
Popular launch games for the console included Dead or Alive 3, Amped: Freestyle Snowboarding, Halo: Combat Evolved, Fuzion Frenzy and Project Gotham Racing.
The name for the Xbox was originally the DirectX box as it came from a group of Microsoft DirectX developers, but later changed to Xbox after focus testing. The marketing team apparently "created this whole, long list of better names for the machine", former Microsoft VP of game publishing Ed Fries said in a interview with Gamasutra.