Xbox 360 costs Microsoft a billion

In the more bad news for Microsoft department, general hardware failures in their Xbox 360 gaming console will cost Microsoft an estimated $1 to $1.15 billion dollars to repair, dealing more losses to Microsoft’s already unprofitable entertainment and devices division.

For users who experience the hardware failure, dubbed “the red ring of death” by some gamers, Microsoft will pay for worldwide shipping and repairs for three years.

Microsoft declined to detail the problems that have caused an onslaught of general hardware failures in recent months but said they will extend the warranty on the consoles to three years. Microsoft will also reimburse the “small number” of Xbox 360 owners who have already paid for shipping and out-of-warranty repairs.

“We don’t think we’ve been getting the job done” said Robbie Bach, President of Microsoft’s entertainment and devices division. “In the past few months, we have been having to make Xbox 360 console repairs at a rate too high for our liking.”

Bach also said the company has made some manufacturing and production changes that he expects will reduce the Xbox 360 hardware lockups, but would not comment on what caused the problems or if any other problems remain. Microsoft also said that sales of the Xbox 360 fell short of expectations.

Microsoft’s entertainment and devices division reported operating losses of $315 million on $929 million in sales for their third quarter, but Microsoft has said it expects the division to post a profit in fiscal 2008. Estimates by Matt Rosoff, an analyst at the independent research group Directions on Microsoft suggest that Microsoft’s entertainment and devices division has lost more than $6 billion dollars since 2002.

For more information and phone numbers to call if you need a repair, the updated warranty information is on Microsoft’s Xbox 360 web site.

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