Microsoft set to lose $1 Billion Dollars due to Xbox 360 repairs

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Jul 13, 2006
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Xbox 360 Repairs Will Cost Microsoft $1B


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Jul 5, 7:11 PM (ET)

By JESSICA MINTZ


SEATTLE (AP) - Microsoft Corp. (MSFT) said Thursday it expects to spend more than $1 billion to repair widespread hardware problems in its Xbox 360 video game console after a large number of them broke down.

Microsoft said it would extend the warranty on the Xbox 360 to three years after too many of the consoles succumbed to "general hardware failure," but the company provided few other details about the extent of the problems.

"We don't think we've been getting the job done," said Robbie Bach, president of Microsoft's entertainment and devices division, which also makes the Zune digital music player. "In the past few months, we have been having to make Xbox 360 console repairs at a rate too high for our liking."

Bach said the company made some manufacturing and production changes that he expects will reduce Xbox 360 hardware lockups, but he declined to identify the problems or say which others might remain. Microsoft said it will record a charge of up to $1.15 billion for the fourth quarter to cover the additional costs associated with the warranty extension.

Matt Rosoff, an analyst at the independent research group Directions on Microsoft, estimates that Microsoft's entertainment and devices division has lost more than $6 billion since 2002.

Microsoft has written down larger amounts in the past - more than $10 billion in the late 1990s related to investments in telecommunications companies, and more than $5 billion related to antitrust issues - but a $1 billion write-down for one division in one quarter is significant.

"It suggests the problem is pretty widespread," Rosoff said.

Microsoft will pay for shipping and repairs for three years, worldwide, for consoles that experience hardware failure, which is usually indicated by three flashing red lights on the front of the console, something gamers sometimes refer to as "the red ring of death." Previously, the warranty expired after 1 year for U.S. customers and 2 years for Europeans.

Microsoft also will reimburse the "small number" of Xbox 360 owners who have paid for shipping and repairs on out-of-warranty consoles, Bach said.

In June, bloggers speculated that the Xbox 360 return problem was getting so severe that the company was running out of "coffins," or special return-shipping boxes Microsoft provides to gamers with dead consoles. "We'll make sure we have plenty of boxes to go back and forth," Bach said in an interview.

Microsoft's entertainment and devices division reported an operating loss of $315 million on $929 million in sales for the three-month period that ended in March.
 
Jul 13, 2006
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Nice, but this is at least a full story behind the matter instead of a blurb on G4TV.

I'm not a fan of Microsoft anyway so this story makes me happy. All of those Xbox fanboys finally have to admit that the Xbox is a piece of shit. If Microsoft can't deny that they have a problem then the fanboys can't act like they don't know.
 

SOS

ONA
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#4
g4TV is a P.O.S. source. No merge.
 

ruckstande

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Apr 2, 2005
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#9
The hardware may be flawed but at least the software and gaming experience is better than PS3. PS3 is lower its price because it is a hit. MS fucked up with the quality of their hardware but on the software end they rule right now.
 

Beeman99

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Mar 14, 2005
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I'm just looking forward to getting my $160 back from MS now.
 

d0uche_n0zzle

**Negative_Creep**
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#11
I'm on my third 360 (gotta love those extended replacement deals) but the games are better then whats available for the PS3.
 

BlackNinja

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#12
its just interesting that people try to make this significantly more than it really is, especially considering that sony's gaming division is set to lose anywhere between 800M and 2Billion themselves, and that has nothing to do with bad hardware. If anyone remembers, the playstation 2 hardware was quite the piece of shit, just ask people how many actual consoles they bought(i bought 2), but no one cared because the best games were found there
 

ruckstande

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its just interesting that people try to make this significantly more than it really is, especially considering that sony's gaming division is set to lose anywhere between 800M and 2Billion themselves, and that has nothing to do with bad hardware. If anyone remembers, the playstation 2 hardware was quite the piece of shit, just ask people how many actual consoles they bought(i bought 2), but no one cared because the best games were found there
Exactly. Didn't Sony offer the same thing because of an "Unreadable Disc" error?
 

BlackNinja

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Jan 25, 2006
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not only that, but many people knew the problem, and tried to fix the laser themselves, and by doing that, voided their warranty
 

ruckstande

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not only that, but many people knew the problem, and tried to fix the laser themselves, and by doing that, voided their warranty
Oh yeah because they figured it was already out of warranty why not do it yourself and then Sony said they would fix certain ones manufactured during a particular date and you were screwed. Oh, and then you had to listen to the assholes who kept saying, "it's not a DVD player its a video game console."
 

Joe Avezzano

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Jul 9, 2006
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Most days on Amazon, the slim PS2 still outsells 360 and PS3. (but not wii of course.) I have no idea why this is.
 

MrAbovePar

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#17
its just interesting that people try to make this significantly more than it really is, especially considering that sony's gaming division is set to lose anywhere between 800M and 2Billion themselves, and that has nothing to do with bad hardware. If anyone remembers, the playstation 2 hardware was quite the piece of shit, just ask people how many actual consoles they bought(i bought 2), but no one cared because the best games were found there
How many repair companies stopped working on the PS2 because they couldn't handle the volume? This is just normal play and the 360 is blowing up. At least with the PS2 there was a breakdown in the DVD drive from excessive use.

The 360 just can't handle heat.
 

Chester'sLiver

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#18
I am on my second xbox 360. I sent one to be fixed by Microsoft and it took so long I had to go to the store and buy one with a replacement plan so if this one goes I can return it right to the store. I then sold the brand new one they sent me (because they couldn't fix the broke one). I have all 3 new systems and I by far use the 360 more then other 2.
 

ruckstande

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#19
Okay now here is the question. If you purchase an Xbox with an extended warranty from Gamestop or some place and MS extends the warranty, will the store extend the warranty the year or so after the MS 3 year extension?
 

Warfarer

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Jun 20, 2005
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#20
I have yet to blow up any gaming console I have owned except an old Genesis that I threw against the wall. Not sure if it is the fact that I have plenty of room around them or that I never use them as a DVD player.
 
Feb 20, 2006
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#23
My 360s been rock solid since I bought it over a year ago. It's been vertical the whole time too. Hope it doesn't crap out.


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Jul 13, 2006
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#24
its just interesting that people try to make this significantly more than it really is, especially considering that sony's gaming division is set to lose anywhere between 800M and 2Billion themselves, and that has nothing to do with bad hardware. If anyone remembers, the playstation 2 hardware was quite the piece of shit, just ask people how many actual consoles they bought(i bought 2), but no one cared because the best games were found there
I had my PS2 from when it came out until this year and didn't have a single problem with it after thousands of hours of use.
 

BlackNinja

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Jan 25, 2006
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#25
a lot of people didn't, and I have had no 360 problems amazingly. My ps2 works ok, it doesnt play psx titles for some reason, and has a hard time on old blue discs, like my marvel vs capcom 2, i may have to reset it 10 times for it to load up
 
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