Microsoft's upcoming Xbox 360 gaming console will play some, but not all, old Xbox games, the company has admitted at the E3 gaming conference in Los Angeles.

This lack of backwards compatibility follows Microsoft's decision to switch chip vendors for its latest gaming device.

The current Xbox uses a processor made by Intel, but the Xbox 360 will deploy IBM's Power chips. The company also swapped out nVidia's graphics card for a model from ATI.

Because the chips have different architectures, games need to be recompiled and tested for the new system. Microsoft promised to start on the process with its best selling Halo and Halo 2 games.

Backwards compatibility is considered of major importance for gaming devices, protecting a user's investment in previous games while allowing access to the latest titles.

Microsoft claims to have over 160 games under development for the Xbox 360, and expects availability of 25 to 40 titles at the time of the launch in late 2005.

The announcement could hurt initial sales of the console as consumers are confronted with a limited selection of games in the early months.

Microsoft's main competitors in the market for gaming computers, Sony and Nintendo, have promised backward compatibility for their Playstation 3 and Revolution consoles.