Microsoft to extend Xbox 360 warranty, take $1 billion hit

Microsoft said Thursday that it will take a $1 billion charge as it extends the warranty on the Xbox 360, after an investigation showed the game console can be prone to hardware failures.

"As a result of what Microsoft views as an unacceptable number of repairs to Xbox 360 consoles, the company conducted extensive investigations into potential sources of general hardware failures," Microsoft said in a statement.

Microsoft said its probe found "a number of factors" that can cause a general hardware failure indicated by three red flashing lights on the console. The company said that, in addition to extending the warranty, it has made unspecified design changes to the product.

Microsoft said it will cover machines that experience failures for up to three years from the date of purchase. To cover the cost of the new policy, Microsoft said it will take a pretax charge of $1.05 billion to $1.15 billion in its just-ended quarter.

Listen up

Examining Xbox problems Microsoft entertainment chief Robbie Bach on how the console glitches came to light.

Download mp3 (435KB)

"The majority of Xbox 360 owners are having a great experience with their console and have from day one," Entertainment & Devices Division President Robbie Bach said in a statement. "But, this problem has caused frustration for some of our customers and for that, we sincerely apologize."

Microsoft also disclosed Thursday that it failed to reach its target of selling 12 million Xbox 360s by the end of its fiscal year on June 30. The company sold 11.6 million units, CFO Chris Liddell said during a conference call.

"That is slightly shy" of its projections, Liddell said, but added "we're happy with that number."

Listen up

Shipments fall short Company CFO Chris Liddell talks about Xbox 360 sales coming in lower than expected.

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Reports of glitches with the Xbox 360 began cropping up shortly after its November 2005 release.

While the company downplayed reports of faulty hardware for the better part of a year after launch, last September it acknowledged that its original batch of systems was failing at an unusually high rate. Microsoft extended the standard 90-day warranty to a full year, and promised to reimburse those customers who had already been made to pay for repairs.

In April, the company once again tweaked its warranty service, saying it would no longer charge shipping on repaired Xbox 360 consoles, and would extend the warranty on those repairs.

Software not a factor
In an interview with CNET News.com sister site GameSpot, Peter Moore, vice president of the Entertainment & Devices Division, said he was personally sorry and apologized to all those who had experienced a failure.

"We haven't done right by our customers, and for that I apologize," he told GameSpot. "We listened, and we're going to make it right." Moore also posted an open letter to the 360 community on Xbox.com.

Moore rejected the notion that the Forza Motorsport 2 racing game was "bricking" consoles. "It's not a software issue, guys," he assured GameSpot. "It's a variety of hardware issues which we're taking steps to rectify."

In a conference call, Bach said no safety issue is involved with the problems.

[qwerty75]

golf clap

Problems with the crappy XBOX 360 is old news.

MS is so hapless.

Will it avert a class action suit in time?

[js33]

Good thing MS doesn't make computers

Good thing they only make software and not computers. Well I guess you could say the XBox is a computer. I rest my case.

[t8]

The don't make computers but...

The don't make computers but they make them crash all the same.

[t8]

Microsoft is the 'crash' king.

They should make an game called 'Crash'. The idea of the game would be to crash the console or PC in the least time possible.

[onlyauser]

The JOKE is the DESIGN and

all the money behind it!

One would think the XBOX360 thing would have been thoughly tested? I dunno but something seems incomplete. Hey, but the cash was there! Something horrid must have happened on the way to the consumer and you know that! Cut this cut that. Save a dime here, save a dime there that is how the game is played. Quality? Of course! It is in that shiny plastic case.

LOL, hang in there MS and Sony if you can while the Wii is Wiing all over your sales!

[Sumatra-Bosch]

Every MS Division a Disaster

Zune completely unusable. Vista unsellable. Xbox completely unstable. Can these guys do something with Lego, maybe?

[Lindy01]

Funny

I stream media from my Vista box via media center to my 360 neither of which have ever crashed.

I kicked off a photo show/song play list of my twins at their 5th birth day party from my Vista PC onto my 60inch TV and stero via the 360....it ran in a loop for about 2 hours as background music and video...low key. Parents were amazed by it.

I then synced the whole thing to my Zune and I can watch/listen to it there.

All electronics break. I went through 3 PS2's in two years....and Sony only changed the PS2 like 8 times inside and out before they got it right...and they NEVER said they had a problem.

[ralfthedog]

They make a good mouse.

The keyboard they make is not bad either.

[LT73]

Thank you...

Thank you Microsoft for doing the right thing.

My box broke last week (red ring of death). I told the tech support dude, absolutely NOT to the $168 (CDN) charge.

This is a Historic moment... Let this serve as a lesson to any company that thinks it can slip one by us tech savvy consumers.

[doggystyle805]

tech savvy... yeah right

if you were really tech savvy, ya would'nt of spent your 400+ hard earned bucks on this pile of crap with pilgrim corn in it. Did ya not see the corn or smell the crap?

[Maccess]

Hardware not like software.

Too bad MS can't stick a EULA that says take this as it is bugs and all, to the hardware they sell. They certainly make the best use of the "as is" policy with software, something they can't do with hardware: If it's broken, fix it, even if it costs a billion dollars.

I wonder how much this whole XBox adventure is costing them. MS already loses money on each XBox it sells, and having to spend a billion on top of those loses must really be upping the costs.

Not to mention that Nintendo, which makes money on each Wii they sell, is whomping both Xbox and PS3, with sales five to ten times greater than either of them.

With such a small market share in the game console business, who would want to write software for XBox?

Wii has lower licensing fees, and a user base five times larger, so any developer will know where the action's at.

[ITpsycho]

re: Hardware not like software

Mr. Maccess,

Just how many xbox's have you had to have repaired? I had the original xbox and never had an issue with it. Since getting the 360, I had a problem once that was simply a hard disk error, which was resolved as soon as I got a larger 120 GB HDD. No circles of death.

Does the Wii have any titles that can stand up to say, Halo2 or Halo3? Shadowrun? Oblivion? Gears of War? In comparing the 360 to the Wii, you really are comparing an entertainment platform to a mere child's toy. The simple fact is that MS's huge lead in titles/software puts it on the highground. The games are graphically beautiful and due to the multiplayer environment (which now includes Vista users), the gaming experience is literally off the charts in terms of enjoyment, skill balancing and interactivity with other players. Also, without going into any heady details, xbox Live Arcade - the games are great and if you wanted to, you could create a title yourself for xbox live arcade.

The xbox 360 is an entertainment platform - the Wii is not. Even priced as it is now, the 360 is a relative bargain in comparison to the Wii or to the PS3 (although if they do lower the price in response to the PS3's lower price, I'll probably buy another one).

While MS may not have responded as quickly as anyone would have liked, they did respond and in providing a 3 year no questions asked fix for the 360, they've garnered my vote as a company that is user focused in regards to home entertainment.

Don't get me wrong, I'm not pro-MS and anti-Apple or anything like that - I am a Linux user (Ubuntu, Mandriva, Xandros, Fedora, Suse & RHEL), have used & owned Apple in the past (love my 60 GB iPod - wish it had the FM radio my daughter has on her Zune) - so please don't read this response as waving MS's flag over anyone else. I am an ex hardware and software engineer doing business analytics now - and even from an engineering perspective, the 360 has it right. I'm pleased that as a 360 owner I now have an entertainment system that will run guaranteed until the next iteration of the xbox, which I will probably buy (I just hope there's a great deal of backward compatibility with my current 360 games and that they leave in the media center extensions, movies, tv's shows, etc).

Anyhow, check your math - the Xbox 360 does not have the smallest market share in the game console biz - not at almost 12 million units sold. I have played the Wii and the PS3, the Gamecube and the PS2 (PS2 rocks!) - I'm sticking with the 360 as my entertainment system of choice for me and my family.

[cybervigilante]

They don't care if they lose money - they win in the end.

The reason they'll lose money getting into the game is simple - Netscape. No one thought Msoft's horrible crap would kill Netscape years ago. But it did. They just sit and wait, with their bags of money and market power, and eventually kill anything good so they can take over.

[Vegaman_Dan]

Criticizing .... good news?

Amazing that even when a company does the right thing, people still criticize them for it.

[qwerty75]

They deserve it

This is an old, ongoing problem. They had to "do the right thing" eventually, to avoid lawsuits.

Perhaps they should have tested better? That would have been the right thing.

MS deserves no praise for this.

[doggystyle805]

HELL YEAH...

the only reason they are acknowledging that they designed and knowingly sold millions of defective consoles is the threat of a class action law suit! add to that the fact that they are now offering a 3yr warranty to repair their defective product without ackowledging fault or intent to continue to boost sales of what is still a poorly unredesigned defective game system! this has now become a major public news issue and they stand to loose lots of money. deservedly. go buy a ps3. you will thank me later when it is still doing what was promised and more. its worth every penny!

[spacydog]

Own an 360 since day 1 and still no problems

All hardware are prone to failure. People who gripe about these like to get their 15 minutes of fame in. At least Microsoft is addressing the issue. How many other companies are stepping up and willing to do the same? Dead battery on short-lived ipod? Good luck with Apple.

[qwerty75]

lol

So because you had no problems, that somehow diminishes the massive amounts of XBOX failures?

This is perhaps the most expensive pooch screw ever.

[Ted Miller]

Good job Microsoft!!!!

On the XBox 360 and keeping your customers happy. Bravo!!!

Now lets talk Vista...

[frank bruce]

Good customer sat policy

I have a friend here in Costa Rica and so far no failures, he is a lucky guy, but the fact that there is a high percentage of XBox Failures makes you wonder how the company will react; so far the first warranty extension and now the second warranty extension will tilt the buying decision of many customers. Not a Micro-soft fan, but I have to admit they are doing the best they can and for that: Keep doing the good work Microsoft.

[Bevo4138]

360 lasts a lot longer than my Commodore 64's ever did

I remember having a few Commodore 64 systems that broke, along with the 5141C disk drives. And there was no offer to replace them. Just when I was getting good at Shinobi too...

Gaming systems sure have come a long way- Now MS is even dropping a billion for customer sat. Who would've thought.

[ralph spoilsport]

Buy Vista - support X-box

I guess we know why the price of Vista is so high - Someone has got to pay for this...

[xbox360defective.com]

PROVE ME WRONG MICROSOFT!

SIDESTEPPING AGAING?

Author: xbox360recall.net, 07/06/2007

Comment from xbox 360 defective website owner:

What Microsoft will probably do, is create a New Game Console... Elite.. or some thing, more advanced... then all 360 owners will be stuck with the old technology.

Microsoft will not make the 360 updated with the new technology, but will start making games for the NEW CONSOLE. Leaving the 360 0wners behind with Old Techology.

What Microsoft should do, is re design the 360, and give us all the NEW WORKING STABLE DESIGN FREE OF CHARGE. Just my thoughts. PS, THE 360 ROCKS WHEN IT IS WORKING I love it.

http://www.xbox360defective.com

Just for the record:
The xbox 360 Rock and Rolls, (When it is workign)
Most awesome experience.
BUT, and that is a Big But, (If you like Big Butts, then that is not a problem...) the xbox 360 is not a perfected piece of equipment. It is still under development and we, the consumers are the Paying Testers.
Just buy 2, if you buy 2, and get the extended warranty,
$400.00 Each + $50.00 for 2 year extended = 3 year warranty.
$400.00 Each + $50.00 for 2 year extended = 3 year warranty.
$900.00, Then you can always be playing your xbox 360.
You can send one in for repairs, and hope your spare lasts long enough to get the one sent off to be fixed, then, when the one you are using fails, ( and it will) you can grab that backup.

No problem.... Just buy 2!

http://www.xbox360defective.com

Ps, one guy just bought a 360, brand new from store, had a Jan. 2006 MFR date, What's up with that... read that story and hundreds, thousands more on my site.

I love all your products, xbox 360 included.
Up until you dropped the ball on this one, your record was spotless. You guys are great, but we deserve a reliable xbox 360 gaming console, with New Hardware that is stable.

[Lindy01]

April 2006 box

Still going strong....without 1 problem. I have been worried with all of the hype since I just went past a year.

Now I am not so worried. I bet it had something to do with that plant they shut down. I figure if mine does RROD I will get a newmobo with a better heat sink when I send it in:)

[Vegaman_Dan]

Kind of cheesy advertising your web site here, isn't it?

Advertising your web site here is a bit cheesy, regardless of your message. It simply isn't professional.

[rpcassidy28]

Still Waiting for the Promised Refund in February

This is more of the same from Microsoft. My son is still waiting for the promised refund back in February. The only thing Microsoft understands is Class Action lawsuits. There are probably five to six Silcon Valley law firms lining up to take the lead and get refunds issued to Xbox 360 buyers and collect a nice $100 million fee for their troubles.
"Those who fail to learn from history, are doomed to repeat it"

[doggystyle805]

AWWWW....poor rich little microsoft, awww

The only reason they are acknowledging that they designed and knowingly sold millions of defective consoles is the threat of a class action law suit! Add to that the fact that they are now offering a 3yr warranty to repair their defective product without ackowledging fault or intent to continue to boost sales of what is still a poorly unredesigned defective game system! This has now become a major public news issue and they stand to loose lots of money. deservedly. Go buy a ps3. you will thank me later when it is still doing what was promised and more!

[Vegaman_Dan]

Sit down, please.

Okay, okay, we got your message. You don't like the 360 and want everyone to go buy a PS3 instead.

Enough already. Give it a rest.

[thedreaming]

so, let get this straight...

...you live with your mother in her basement and you think Sarah Michelle Gellar is hot?

Get a clue, the ps3 is nothing more than an over priced paper weight with a blu-ray drive and that's pretty much it.

About the only game with playing on the consol is Resistance, Fall of man and it looks more last gen than next gen.

The 360, despite it's problems, has dominated and continues to dominate the marketplace.

The wii is cute, but that's nothing more than a gamecube with a new control scheme. The graphics on it aren't even that great.

[C_G_K]

1 Billion Dollar$ for M$

That is pocket change for Billy Gates.

They rushed crappy hardware to the market to try and beat out Sony and Nintendo and now they (and their customers) are paying the price.

This just proves that without a monopoly, Micro$oft CAN NOT COMPETE. Zune and Xbox are a complete and utter failure financially. I for one will never buy an Xbox, so it won't affect me. A good PC and a WII are good enough for me (too bad my stupid M$ windows PC crashes all the time and that it takes endless fiddling to get games to run right... just more crappy products from Micro$oft).

M$ knew they had no choice but to extend the warranty or risk a consumer revolt. If people have a dead Xbox 360, they won't buy overpriced games, where their only hope to make a profit lies.

I won't be shedding any tears or losing any sleep over this I can tell you.

[cybervigilante]

Typical Microsoft

Isn't this Microsoft from the get-go? Rush out a flawed, buggy clone of better product lines that they crush with their monopolistic size, and then let the first round of customers stupid enough to buy the beta be the unsuspecting testers - only at their expense and frustration.

[cybervigilante]

MicroNazis Strike Again

They put out this huge, buggy crap like vista but can't do the basic things right. Their file browser is still in the dark ages. IE6's horrible bugginess is still king since no one wants to install IE7 and have MicroNazi peering into their computer with "Genuine Windoze" And when is their browser going to have a decent download? Their utilities, like the backup, are near useless. The Registry is the most horrible idea to ever hit computing. Even in Redmond they have to reinstall windoze every six months after it gets crapped up. There is NO excuse for such a horrible piece of crapware. I've lost ten years of my life fighting their rotten crash-programming, with the Registry being the worst idea they ever had. It shouldn't be this way. I want to Use a computer, not nurse it all day.

I have to start my computer in fear every day, wondering if windoze will crash taking everything with it since the Registry is a giant spider that ties up everything. You cant just backup all your files and reinstall since they make sure you're tied up that way. They just make everything harder for no good reason at all - I think the Devil must work there. If all programs were standalones, you wouldn't have that worry. But the Registry goes with Msoft's ideal of CENTRAL CONTROL OF EVERYTHING.

[gp2792]

get a hobby

this might be the dumbest post i have ever read. you don't like the registry??? What does that have to do with xbox? Why do you hate the registry anyway? Are you advocating a return to .ini files??? Join us here in 2007, will you? And stop running that copy of Windows ME. XP or Vista don't take nursing all day to run fine. Any OS takes expertise to run well. Clearly you don't have it. by the way, if you want to back up the registry...try system state backup. it picks up those pesky registry files all simple like...for morons like you.

[ahickey]

Do all of these replacement Xbox360s count as shipped product

Just wondering if all these replacement Xboxs get counted in their shipped products numbers.

The chances are it would make a relatively insignificant difference to the overall numbers, but still it would be good to understand.