The cheaper model is rumoured to be a set-top box based on Windows 8 for playing casual games and running the kind of entertainment services (like Netflix and BBC iPlayer) that are already on Xbox 360, in something that doesn't look so out of place in the living room if you're not a Halo fan. Think midway between Xbox and Windows Media Center…
5. Surface 2 and more
The other Xbox rumour is a 7-inch Xbox Surface gaming tablet running a custom version of Windows RT with SmartGlass.
Like the rumoured Surface Book touch Ultrabook, AMD-based Surface Pro 2 and smaller Qualcomm-powered Surface RT 2, this was suggested by tipster and "social experimenter" @MSnerd. CEO Steve Ballmer has said that Microsoft will "obviously" make more hardware "where we see important opportunities to set a new standard" and thanks to the job adverts TechRadar discovered back in August, we know Microsoft is working on a second generation of Surface tablets so we'll see new models. Other rumours say Microsoft is ramping up its own manufacturing and distribution facilities, which you need when you're a "devices and services" company rather than a software developer.
What we're not sure about is the specific hardware Microsoft will use or the exact products we'll see (we're similarly a little sceptical about the often-rumoured Surface Phone).
Microsoft bought giant touchscreen maker Perceptive Pixel this year and CEO Jeff Han is hard at work in Redmond, probably on cheaper versions of the 80" touchscreen system that businesses can use with Windows 8 and Kinect for video conferencing or visualising data – or it could be an all-in-one PC for the home. We expect new Surfaces will come later rather than sooner in the year and run Windows Blue.
6. Windows Blue
If you have a new Surface every year (to compete with the new iPad every year), you need an update to Windows RT to go on it. Full updates to Windows 8 will probably still come every 2-3 years but we expect to see annual updates of Windows RT (and WinRT on Windows 8) that are cheap or even free.
The project codename is Windows Blue, according to rumours, and we expect to see the first release in the autumn with the next Surface models.
7. Something we know nothing about
Given how much better the company has got at keeping secrets, we're expecting at least one big surprise from Microsoft that we haven't heard about yet.
Perhaps the "ground-breaking hardware, software and experiences across computer vision, machine learning, human-computer interaction, image and video processing, networking and graphics" that the team behind Kinect is building to "revolutionize consumer electronic devices" according to a recent job advert. That might be Kinect 2 and Kinect Glasses, or it might be something completely different.
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Mary (Twitter, Google+, website) started her career at Future Publishing, saw the AOL meltdown first hand the first time around when she ran the AOL UK computing channel, and she's been a freelance tech writer for over a decade. She's used every version of Windows and Office released, and every smartphone too, but she's still looking for the perfect tablet. Yes, she really does have USB earrings.