Malaysia Nikko eyes Microsoft deal -paper

KUALA LUMPUR, April 2 (Reuters) - Malaysia's Nikko Electronics Bhd is rumoured to be the front-runner for a videogame contract from U.S. software giant Microsoft Corp. (NasdaqNM:MSFT - news), a weekly business magazine said on Sunday.

The Edge said Nikko Electronics was expected to manufacture the X-Box, a videogame console that is expected to rival Sony's PlayStation2, for Microsoft.

Nikko Electronics' shares have seen a strong rally in the past week, closing at 12.80 ringgit on Friday, up 33 percent from the week ago.

The Edge said according to news reports, the X-Box could play movies on Digital Video Disc (DVD) mode and be connected to the Internet.

The box comes with an 8-gigabyte hard drive for storing games and data, a 600MHz Pentium III processor and a graphics chip that can render 200 million polygons a second.

Nikko Electronics makes radio-controlled toys sold under the brand name Nikko Japan.