Rumors have been going around lately that Microsoft may soon allow third-party manufacturers to use Xbox 360 technology and merge it with other devices to expand its functionality. While the buzz is far from confirmed, Wedbush Morgan analyst has already expressed doubts as to how feasible such a radical change in business models is.

Essentially, Pachter called this setup "too expensive." He then said the plan doesn't seem too likely to fall through, unless Microsoft and its partners are ready for some big risks.

"I think it may be possible as a way to penetrate more difficult markets like Japan, but don't really see how it would work in practice in other markets," he explains.

He adds "to add 360 functionality to another consumer electronics device, such as a Blu-ray player, the manufacturer would incur relatively significant additional cost. That would place the hybrid device at a disadvantage."

Certainly, a lot of pre-E3 rumors have been going around and Microsoft's hints of something earth-shaking to be announced at the show are fanning the flames. We guess we'll just have to wait and see.