Mark Whittard, general manager of Toshiba's Information Systems Division in Australia, believes that Microsoft will release an Xbox 360 with an internal HD-DVD drive in future.
"I would imagine that there are plans in place to put an HD DVD drive internally in future revisions of the product," he told IT Wire in Australia.
"They're not speaking about it publicly at the moment but I would expect them to do that and fairly soon."
Microsoft has previously indicated that it plans to offer the HD-DVD - a rival to Sony's Blu-ray technology, which will ship as part of PlayStation 3 - as an add-on peripheral this Christmas.
But it has rejected suggestions that it will revise the Xbox 360 hardware in the manner Whittard suggests, believing it will confuse the market.
Last December, prior to the announcement of an HD-DVD add-on, the company said it had no current plans to release an Xbox 360 equipped with an internal HD-DVD component - although some would highlight its use of the word "current" as important.
Then again, Microsoft will also be acutely aware of the reaction to Sony's pricing for PlayStation 3, which will cost considerably more than its next-generation counterpart largely thanks to the use of components like Cell and a Blu-ray drive.
Furthermore, Microsoft has repeatedly asserted that games will not be allowed to run from HD-DVD discs.
Meanwhile, describing the battle between Xbox 360 and PlayStation 3 as "one looming potential war" in the HD-DVD/Blu-ray confrontation, Whittard clearly feels the comfort of Microsoft's backing for HD-DVD - a project that Toshiba is also intimately involved in.
"With Microsoft's marketing engine behind HD DVD, who knows what will happen," he told IT Wire.
Microsoft had yet to respond to Whittard's comments at the time of going to press.