Seamus Blackley had been at Microsoft since 1998

The company has also slashed the price of the Xbox, down from �300 to �199.

Mr Blackley said that no-one in the games industry was surprised at his resignation.

He said: "There's no good time to resign.

"I've really poured my entire soul into XBox. There's no way I would leave if there was something wrong."

He joined Microsoft in 1998, initially working on Windows, the company's flagship operating system.

Then he and a group of colleagues dreamed up XBox in 1999.

Competition

The Xbox launched amid great fanfare in the UK in March as excited fans queued to get their hands on the long-awaited machine.

Its main competitors are PlayStation 2 and the upcoming GameCube.

But there have been mixed reports of Xbox's popularity.

Sony's PlayStation 2 leads the market

The price cut comes into effect on 26 April.

Those who bought the Xbox at the higher price have been promised a "thank you package", which will include two free games and an Xbox game controller.

There are also concerns it is not selling well enough in Japan, which will become the only country where the Xbox is sold at a higher price than the PlayStation 2.

Microsoft said the company plans to make hefty investments in XBox over the next year, and thinks it could sell as many as 11 million consoles by June 2003.