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In 1999 they announced their next product was a return to the FPS genre, with a world-beating physics and AI system, to be known as Halo and to be released at the same time on both the Mac and Windows. On June 19, 2000, Microsoft announced that they had acquired Bungie Software and that Bungie would become a part of the Microsoft Game Division (subsequently renamed Microsoft Game StudiosMicrosoft Game Studios is a conglomerate of third-party video game developers and publishers who have exclusive contracts with Microsoft to develop and publish games for the Xbox and PC under the Microsoft Game Studios brand. Microsoft Game Studios is a d) under the name Bungie Studios. The original versions were soon delayed and the game was re-purposed for the XboxThe Xbox is Microsoft's game console, released on November 15 2001. It is Microsoft's first independent venture into the console arena, after having collaborated with Sega in porting Windows CE to the Sega Dreamcast console. The price is currently 149 USD, with the Mac and Windows versions only shipping two years later when it was no longer the renowned product it would have been in late 2000. The XboxThe Xbox is Microsoft's game console, released on November 15 2001. It is Microsoft's first independent venture into the console arena, after having collaborated with Sega in porting Windows CE to the Sega Dreamcast console. The price is currently 149 USD version of Halo received the Game of the Year and Console Game of the Year awards for 2002 from the Academy of Interactive Arts & SciencesThe Academy of Interactive Arts & Sciences AIAS is a non-profit organization that promotes entertainment software, such as video and computer games, with its Interactive Achievement Awards ceremony held annually since 1998. It is mostly comprised of indus, is known as a system seller and as of 2004 is still a videogame bestseller. has been one of the most critically acclaimed games over the last three years, and its sequel Halo 2Halo 2 is a first-person shooter developed by Bungie Studios for the Xbox video game console. It is the sequel to the game Halo: Combat Evolved and features a newly built graphics engine and the addition of new elements to the game. Like the Marathon seri has been called the 'most anticipated game of all time' by IGNIGN is the oldest and most visited general gaming website on the Internet. Founded in 1995 (the 1 million+ member message boards were opened in July 2000), the part-free and part-subscriber only through their Insider service ($20/year membership) site has Xbox.

Their offices were originally based in Chicago, Illinois. After Microsoft's acquisition, they moved into the Microsoft Campus at Redmond, Washington.

While not directly behind the program, Bungie oversaw and 'signed off' on the Haunted Apiary puzzle, named after the address of the 'hacked' bee-keeping website around which the game revolves briefly appeared in the Halo 2 theatrical trailer. They provided the Haunted Apiary designers with the "Halo Bible", allowing the story to fit to Bungie's specifics.