So will the Army go out and buy the Xbox? Not quite. Roger Smith, chief technology officer for PEO STRI, the Army command responsible for purchasing training equipment, claims that Microsoft refused to sell him the consoles. Smith told me that he discussed acquiring the Xbox with Microsoft representatives at a trade show back in 2006. According to Smith, the Microsoft executives said they would neither sell the Xbox 360 nor license XNA game development tools to the Army for three reasons:

Microsoft was afraid that the military would buy up lots of Xbox 360s, but would buy only one game for each of them, so MS wouldn't make much money off of the games.
A big military purchase could create a shortage of Xbox 360s.
If the Xbox became an Army training device, it could taint its reputation. Microsoft was concerned that "do we want the Xbox 360 to be seen as having the flavor of a weapon? Do we want Mom and Dad knowing that their kid is buying the same game console as the military trains the SEALs and Rangers on?" Smith told me during an interview for Training & Simulation Journal.
It's hard to believe that Microsoft would risk a public relations disaster by refusing to sell products that would save the lives of American soldiers during time of war. So I contacted Microsoft, and received an e-mail response, or rather a response relayed through their outside PR agency Edelman.