OT:X360 Red ring of Xbox death costs Microsoft $1b

apit34356 wrote on 7/8/2007, 4:59 AM
OT: I have posted over a year ago that the X360 needed to be re-engineered
and had serious design faults, a few believed that I was just protecting Sony's PSP3 image. MS has officially acknowledge "some" of their problems, requiring 1Billion dollars to fix. Of course, MS must fix these issues before HALO3 is release and MS has back-off pushing hard the HD-DVD as the solution for HD needs after HP jumped ship on long-term HD-DVD commitments. MS has focused on gaming needs for marketing HALO3 ( the real money maker, not HD-DVD) than trying to piss off Sony - Sony can tripped itself up without any help/

Here's the article.

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Microsoft is taking a $1bn hit to fix Xbox 360s, conceding residual hardware faults in its games console are causing users frustration and an "unacceptable number of repairs."

The software giant said Thursday it's extending the Xbox 360's current one-year warranty to three years from date of purchase to cover a hardware crash that generates a trio of red warning lights, branded "the red ring of death." Microsoft is also reimbursing customers who've previously paid for repairs.

Additionally, Microsoft admitted the Xbox 360 has failed to hit its planned target of 12 million units sold by the end of June - chief financial office Chris Liddell said 11.6 million devices had sold since the November 2005 launch. The 12 million number had already been cut in January from between 13 million and 15 million.

The news came as Microsoft also passed its self-imposed deadline for its latest consumer venture, the Zune music player. Microsoft's lack of formal announcement suggests it failed in its target of one million Zunes sold by the end of June - the close of Microsoft's fiscal year.

Microsoft has taken increasing flack on the Xbox 360, not simply because the hardware is copping out at such a high frequency, but also for poor Microsoft customer service.

Some 30 per cent of Xbox 360's are estimated to overheat heat and fail, with one man surely scooping an award for endurance and loyalty having owned a total of eight units that bombed. Until now, customers outside their warranty have been encouraged to call a special telephone repair line where they've been charged $129 to fix the $300 - 400 machines. Those reluctant to spring for the cash have been offered a number of DIY fixes, such as those here and here.

After a year and a half of mounting complaints, Robbie Bach, president of Microsoft's entertainment and devices division, downplayed the timing of today's news saying: "This is just one of those things that happens when it happens. We reached our conclusion early this week and because it's a financially meaningful issue we had to announce it immediately."

Microsoft will absorb the Xbox 360 costs, estimated at between $1.05bn and $1.15bn, in the fourth quarter that just closed. Microsoft is due to present the full quarterly and annual results later this month

Comments

blink3times wrote on 7/8/2007, 5:30 AM
Well, I will say that it is nice to see a company stand up and take responsibility.... I've seen others in the same position DENY, DENY, DENY.

If any company can absorb a $1b loss and get up to work the next day.... it's Microsoft.
TheHappyFriar wrote on 7/8/2007, 5:39 AM
i'd say it was that or class action against then. but this has been going on since release. infact, MS STILL won't say what's wrong, just that they've fixed it.
JJKizak wrote on 7/8/2007, 5:51 AM
No big deal. It's a billion less going to charitable grants.

JJK
TheHappyFriar wrote on 7/8/2007, 9:28 AM
see, if that was a huge chunk of MS's $$ then i'd say it's more noteworthy. But that $1b to MS is like $300 to me.

I'm AM glad they did it though, but it should of been done sooner: nintendo had similar problems with the original NES & replaced/shipped new ones to everyone who had a defective one, free. Back when they were new to the game business. Good to see MS putting customers before $$ sometimes.
DJPadre wrote on 7/9/2007, 2:44 AM
"No big deal. It's a billion less going to charitable grants."

all of which are fully tax deductable...
DGates wrote on 7/9/2007, 6:59 AM
It's amazing that XBox and Playstation have screwed themselves into the holes they're in, while Nintendo continues to enjoy the view from the top.
JJKizak wrote on 7/9/2007, 7:15 AM
Newspapers said yesterday that WII is flying off the shelves and is always out of stock. They can't keep up while Xbox and Playstation are readily available.
JJK
RBartlett wrote on 7/9/2007, 5:14 PM
Consumerism and the outsourcing of manufacture are to blame, IMHO. Once upon a time a fabrication plant would have bent over backwards to win such a funnel of orders. This was before everything to do with games console (and mobile phone) technology was turned into a commodity or a loss-leader. The product the big players want to see shipping is the games software, the hardware was probably seen as irrelevant until it starts to burn into the margins even further. The initial ambition is probably that quality control can be improved and subsequently cheapened over time. The 360 shows something that was already too cheap and that hasn't got the focus to be improved past that first quality control bump/mountain.

Fortunately many good independent technicians have made a living off the >12month old 360s that fail to power-on-self-test. This has also stimulated additional sales for the high street shops. I believe that some 360s also become useless the moment that they go onto the "Live" service due to mistakes made in the authentication service. Microsoft think some percentage of legitimate units have been compromised and they send some sort of electronic counter measure out that breaks the unit. Warranty repair for these ought to be no-issue but it is a lot of trouble for the honest customer.

Going back to how the 360 failure benefits the industry and in particular the retailer and the subsequent owner who may be of smaller means... What I mean is that for 12months the owner of the 360 buys accessories and games titles. Then on the 14th month his 360 fails. So he exchanges the now useless library for WII or PS3 games in his local dealer. The 360 is then given as scrap for $50 to the independent repairer and cuts his losses. This repairer then removes the overly generous and inconsistent amounts of heatsink compound from the components, possibly adjusting the downward force between the heatsink and the IC package, and maybe even roasts the board to make up for the poor solder flow process that leaves dry joints. Then he sells the unit for between 1/3 and 2/3 or the new price. The reason why he gets a good price is that there are plenty of second hand games.

If the fixed 360 lasts 24 months or more then Microsoft might have a new loyal but lower end customer (as presumably a rich customer wouldn't care to buy 2nd hand /userfor anything). However the premium customer is now buying WII, PS3 or PC games. That might cost M$ more than $1bn in the longer term. A pity as the 360 has had the right position to potentially overshadow Sony and Nintendo into even their next generation (outside Japan).

So much of the technology is good but the implementation is too cheapened, IMHO. I'm in the market for a 2nd hand repaired 360. In case the giant external PSU fails on whatever I manage to source then I have my ATX->360 cable and 500W 20A PSU at the ready. I'm considering enclosing the PSU in a white/green lego construction. The more 360s that fail the more games will appear in the bargain buckets in the game shops. My 5yr old will appreciate this if I can get some good younger games by the time his 6th birthday is upon me.

So there is always some good that comes from all this bad. It is nice to think that some of the repair money can be returned by M$. However many repairers are probably not in the position to offer receipts. Many have followed internet based advisories and some are even of school age themselves.

It is almost the modern equivalent of the LOGO "Turtle". School kids cutting their teeth on technology, soldering and mechanical construction on the back of Microsofts ineptitude, or at best it's ability to drive the cost of manufacture so low that it becomes diabolical.

Perhaps customers should issue an EULA to microsoft before buying the next gen console they issue? ;) Something about the rights to have equipment that is fit for purpose.

Sony isn't in the clear either. Outside the USA and Japan the consoles for the rest of the world cost a lot more against the wealth base of the target community. They have also been cheapened from what I've read with regards to their manufacturing and in the technological power available in the silicon that is in the current implementation.

I know none of this first hand but the press have covered almost all aspects of the above. I'm compiling it here as I find it all mildly amusing. Home computers used to serve this gaming market quite well and with reasonable economy, performance, price and longevity. Now we've got PC-compatible compromises and dodgy consoles. Thank goodness that I personally don't have time to spend more than a Dad's amount of time on a game with the kids.

Lastly, Microsoft also give us the legacy of a good few lessons in macro-economics. We ought to thank them for all these gifts!

Welcome to the world of the massive "public beta"!