Recent reports around the gaming industry suggest that Microsoft may be upping the storage capacity for the Xbox 360.  Several online retailers are no longer stocking the 120GB harddrive for the console and units are becoming increasingly difficult to find at retail stores.

Rumor has it that the reason for the shortage is that MS is phasing the drive out and will be replacing it with a larger 250GB model.  The extra storage space would certainly come in handy for heavy media downloaders, but we’re more curious to see what kind of a price tag Microsoft puts on it.  The 120GB drive was notoriously overpriced at a wallet-smashing $150.

These reports have not been confirmed by Microsoft, but given the success of the Modern Warfare 2 250GB Xbox 360, it wouldn’t be a big surprise; we’ll keep you updated as we learn more.