By Scott Hillis

SAN FRANCISCO (Reuters) - Microsoft Corp (MSFT.O: Quote, Profile, Research) is not in talks to include Sony Corp's (6758.T: Quote, Profile, Research) Blu-ray high-definition DVD technology in its Xbox 360 video game console, an executive said on Wednesday.

The comments by Aaron Greenberg, group product manager for Xbox 360, poured cold water on recent speculation that Microsoft could support Blu-ray after Toshiba Corp (6502.T: Quote, Profile, Research), backer of the rival HD DVD format, gave up when key movie studios and retailers abandoned the technology.

"Xbox is not currently in talks with Sony or the Blu-ray Association to integrate Blu-ray into the Xbox experience," Greenberg told Reuters in an interview.

Microsoft, which has stopped making an HD-DVD add-on for the Xbox 360, would continue to invest in its Xbox Live online service that already lets users rent hundreds of movies, including ones in high-definition.

"We're the only console offering digital distribution of entertainment content," Greenberg said.

The software giant also expected that supply problems for the Xbox 360 meant the machine was outsold in the U.S. market by Sony's PlayStation 3 console in February for the second month in a row.

"We definitely expect we will trail in February as a result of our supply constraints," Greenberg said, adding: "By April, we will be in a very healthy inventory situation."

That would be in time for the April 29 launch of Take-Two Interactive Software Inc's (TTWO.O: Quote, Profile, Research) "Grand Theft Auto 4" game, which is widely expected to be one of the best-selling titles of 2008 and could drive purchases of the Xbox 360 and PS3.

Greenberg spoke a day ahead of the planned release of U.S. video game sales data for February by market research firm NPD, whose monthly reports are pored over by game companies eager for bragging rights.

The PS3 struggled last year due to its high price and lack of must-have games, but sales have picked up in recent months thanks to price cuts in late 2008 and a slate of anticipated upcoming games.

"We still think we have a great value, that we have significantly better value than Sony. Every month we've actually been in stock we've outsold them by a 2 to 1 margin," Greenberg said.

(Reporting by Scott Hillis; Editing by Gary Hill)

Yeah! Microsoft defeats Sony no matter what the Situations are!

This was also confirmed in Major nelsons latest podcast.
He stated Microsoft are in talks with Sony regarding Blueray but not from an Xbox 360 standpoint.

I guess we can expect to see it popping up in new PC's in a year or so