Xbox 360 repairs will cost Microsoft $1B

[e²Studios]

Not looking good for M$ in the video game realm. I wonder when investors will have enough of seeing red and pull the plug on M$ consoles. I bet that with Live going to PC's that it could be an exit plan to keep live going in the PC world and drop console support all together. It's all their fault though for using shoddy hardware for the X360. They can Bribe and buy out software for millions, but they used bargain basement parts for their hardware.

SEATTLE - In another setback for Microsoft Corp.'s unprofitable entertainment and devices division, the company says it is planning to spend at least $1 billion to repair serious problems with its Xbox 360 video game console

http://news.yahoo.com/s/ap/20070706/...LyZxe7oy0jtBAF

Ed

[AppleGuy08]

1 billion? that is nothing to bill. he'll just say heres 1B now stfu and fix the damn things!

[steamboat26]

Theres really no winning this generation- 360s are dropping like flies, PS3s are gathering dust on the shelves, and Wii will never have acceptable online play. And on top of all that, the libraries for the Wii and PS3 are still lacking. Can anybody do something right this generation?

[2nyRiggz]

appleguy08 what the hell are you talking about....thats a lot of angry customers and the admitting of a console flaw they have to deal with plus the fact its 1 billion in repairs.

I'm glad that they "man up" and admit the thing is flawed....now they must find a solution to the problem and not just put extra heatsinks on the thing.



Bless

[raggedjimmi]

why on earth didn't they stress test the machines, delay them for an extra 2 months to work out the kinks. Or even then, when the problems were rolling in why didn't they just redesign the insides?

I don't get how it could have come to this.

[Haoshiro]

I've had mine since near launch and never had a problem... obviously a lot of people have, but it can't be completely wrong if people like myself have never had problems.

[ChrisK018]

From a New York Times article right here it says that this problem appeared on the consoles after extensive use. Stress testing will only go so far.

Bill Gates wealth has been surpassed by Carlos Slim Helu. I guess this 360 mess is just one of the contributing factors.

[sarcosis]

I'm glad that Microsoft is owning up to it's mistakes. Makes my Microsoft Extended warranty moot but it also adds an extra year. Kinda sux for me, but i'll live with it. There are many companies that would not own up to this if thy didn't have to. It's a nice change. Only if car companies would be this progressive...

[GFLPraxis]

The XBox division just keeps sinking further and further into debt. 4 billion on the first console, the second console has lost billions more and was just on the verge of starting to stop losing money when bam, another $1 billion in losses.

At this rate it's going to take two MORE generations of losses for Microsoft to be profitable.

Is this the only way Microsoft can win? By suicidal business tactics that only they can survive? That's actually rather scary, and you'd think it'd violate the antitrust....

If Microsoft got a dominant share they'd be nigh-impossible to oust with such huge bank accounts

I'm glad Microsoft stepped up to cover all the systems, it's just that the implications of the amount of money they're soaking up and the fact that they don't care are scary. It violates all concepts of fair competition.

[bluebomberman]

From daringfireball.net:

Microsoft also announced that they shipped 11.6 million units as of the end of June. Do the math: $1 billion divided by 11.6 million equals about $85 per unit. Not just per broken unit, but for every Xbox 360 console that’s been sold to date. Yikes.

[GFLPraxis]

Originally Posted by bluebomberman

From daringfireball.net:

Microsoft also announced that they shipped 11.6 million units as of the end of June. Do the math: $1 billion divided by 11.6 million equals about $85 per unit. Not just per broken unit, but for every Xbox 360 console that’s been sold to date. Yikes.

If that's true the analysts might have simply overestimated. Or assumed that every defective XBox warrants a replacement and is thrown out not repaired.

[aristobrat]

Wonder how much it's cost Apple to fix things like the first generation MacBook and MacBook Pro problems?

[zero2dash]

It hurts, and the lack of effort put into effective cooling is quite ridiculous, but remember...Microsoft still makes a killing on accessories, the games they publish, as well as Live Gold subscriptions + Microsoft "points".

360 is a great system, they just need to go back to the drawing board and get the 65nm systems going, as well as give all the current 90nm 360 owners a free swap to the 65nm to save face. They're already losing money in the grand scheme of thing; if they don't start getting a little more fan support back, people will not be interested in whatever console they come out with next for fear of the thing breaking down within the first year of it's life (based on their bad 360 experience[s]).

[GFLPraxis]

Originally Posted by aristobrat

Wonder how much it's cost Apple to fix things like the first generation MacBook and MacBook Pro problems?

The failure rate is nowhere near 33%.

[aristobrat]

Originally Posted by GFLPraxis

The failure rate is nowhere near 33%.

Thankfully! I was just thinking that with as many motherboards and cases that got replaced (and all of the 3-way overnight shipping) that it was probably a crazy amount too. Not like 1 billion, but still up there...

[bobber205]

I was going to say "haha" but at least they've been almost Nintendo nice in replacing them haven't they?

[takao]

yeah currently the whole xbox devisions is quite a big burden on the investment side ... billions after billions each year might only be supported for so long.. sure it's a core part of their "getting into the living room" strategy but if their share holders decide someday that they have enough of losses the could get the boot quite abruptly....

especially now after vista is actually selling poor (as we all hoped)

i guess they could get throug hwith the 360 but if they can't turn into the black numbers it might not be that great for the next generation 4 years down the line

[mrgreen4242]

Originally Posted by takao

yeah currently the whole xbox devisions is quite a big burden on the investment side ... billions after billions each year might only be supported for so long.. sure it's a core part of their "getting into the living room" strategy but if their share holders decide someday that they have enough of losses the could get the boot quite abruptly....

especially now after vista is actually selling poor (as we all hoped)

i guess they could get throug hwith the 360 but if they can't turn into the black numbers it might not be that great for the next generation 4 years down the line

You understand MS's intent with the XBox, but I don't think you get their commitment to it or the extent of how important it is. They need to get into the living room, and they need to do it now. The next "big thing" is going to be IPTV. If MS can get in early setting up the XBox as a leading IPTV 'receiver' it will do more than just sell hardware. It will get cable/TV providers to use the WMV format and the MS (for lack of a better term) formatted IPTV system. MS is already starting to license a stripped down version of the 360 OS for IPTV cable boxes and if they can make that THE standard for TV the licensing/royalty fees will be HUGE.

I think that's where MS is hoping to make serious cash with the Xbox line. I'm not sure if they knew EXACTLY what they were aiming at when they first built the XBox, other than they knew they wanted to be positioned in the living room. But, by the time they started building the 360 I think they knew exactly how they were going to become profitable. I'm wondering if you'll be able to lease a 360 (or its successor) from your local cable/phone/whatever provider as your IPTV receiver for an extra few bucks a month. That'd be a nice revenue stream for MS as well...

[Coded-Dude]

Originally Posted by raggedjimmi

why on earth didn't they stress test the machines, delay them for an extra 2 months to work out the kinks. Or even then, when the problems were rolling in why didn't they just redesign the insides?

I don't get how it could have come to this.

um.....simple. They needed as much of a head start as possible.

[kuebby]

Originally Posted by takao

yeah currently the whole xbox devisions is quite a big burden on the investment side ... billions after billions each year might only be supported for so long.. sure it's a core part of their "getting into the living room" strategy but if their share holders decide someday that they have enough of losses the could get the boot quite abruptly....

That's what I've been thinking. Even before this new $1.5B snafu MS's gaming division has already lost between $5B and $6B, that's not chump change for any company. MS's stock hasn't been doing that well either so a cutback/cutoff of the game division would seem like a sound investment.

[zero2dash]

Just read this and it sorta pissed me off.

http://www.dailytech.com/article.aspx?newsid=8226

Gadgets
Steve Ballmer Describes New Xbox 360 Warranty as "Painful"
Marcus Yam (Blog) - July 30, 2007 7:45 AM

Microsoft CEO describes Xbox 360 $1b charge as "painful"

Following reports showing that up to one-third of all Xbox 360 consoles are afflicted with the fatal hardware error termed the “Red Ring of Death,” Microsoft extended its warranty on the machine to cover such a defect for three years.

Although the gaming press has heard many comments from Microsoft’s Entertainment and Devices Division regarding its new policies, little has come out from the giant software company’s top brass.

Speaking to financial analysts last week, Microsoft CEO Steve Ballmer spoke out on the topic on stage, saying, “We have to learn from our mistakes. It was painful to announce the write-off that we had to announce, and yet we knew we had to take care of our customers.”

The write-off that Ballmer is referring to is the over $1 billion charge that Microsoft’s entertainment division is taking to not only repair for free all afflicted consoles, but also to issue refunds to gamers who have paid up to $140 for a fix.

The extended coverage of defective Xbox 360 consoles caused Microsoft’s gaming division to lose $1.89 billion for the quarter – about 47 percent more than the previous period’s $1.28 billion loss from last year.

Although the Xbox 360 “Red Ring of Death” debacle may have shaken consumer confidence in the company’s ability to design and manufacture hardware, Ballmer promised that, going forward, Microsoft will be “world-class when we do hardware.”

Look in the mirror you moron. (I have a strong dislike for this Ballmer guy.)
You shipped consoles without stress testing them. You shipped consoles without burn-in testing them. You skimped on parts and the cooling system. You designed them. Don't act like you're doing me a favor by fixing my flawed system that you designed, manufactured, and rushed to retail.

Eat it.

Maybe next time you won't rush the Xbox 720 or whatever the hell you call it, you f'n tool.
If you would've spent 6 more months fine tuning and tweaking what you have, you wouldn't have just had your @$$ handed to you to the tune of $1B, would you.

[Coded-Dude]

Well now that would have really changed the Home Console War though.....
Doing all those things probably would have raised the price of the console(at least slightly) and considering they would have only launch a mere 6 months before the competition instead of an entire year, things may have been substantially different. Nintendo would still be owning the market, but the Sony/MS battle would be a completely different picture. I think by launching early, and cheaper, they at least helped to keep their foothold in the market(as unstable as it may be). Either way the competition is good for all of us, and hopefully MS will do better testing on their next console venture. I am willing to bet they go above and beyond on the next hardware, because if they don't they might as well not even try - IMHO.

[SpankyPenzaanz]

well I would rather it cost THEM and not ME

[zero2dash]

Originally Posted by Coded-Dude

Well now that would have really changed the Home Console War though.....
Doing all those things probably would have raised the price of the console(at least slightly) and considering they would have only launch a mere 6 months before the competition instead of an entire year, things may have been substantially different.

Well, ok, fair enough...taking an additional 6 months would've hurt them, but it couldn't have taken much longer than 1-2 months tops to scrap the POS heatsink cooling they came up with (in the current models) and release a revamped, cooler running setup with either larger heatsinks, better fans, both, heatpipes etc. or something. Forget the 65nm process. A better HSF solution couldn't have added much more to the manufacture cost and they could've eaten a $10-$20 increase per console and still came up better out because there wouldn't be all these problems in relation to RoD and the warranty being extended twice.

IMO they were stupid for what they did, I'm sorry. You don't put that much power into a small enclosure like that without some serious thought into your components. I'm in the process of building a Q6600 (quad...1 chip, 2 core) computer and I'm damn sure not using the stock Intel HSF; I will be buying a Tuniq Tower (despite minimally overclocking the Q6600 to 3gig by just upping the FSB) because it runs the cpu cooler and the fan is quieter than the stock one. Here we're talking about a 1 chip, 3 core design (360) and they used a pathetic cooling system, and that just won't cut it.

1 more month in R & D and some common sense would've given them a $1B gain rather than a loss. /shrug

Originally Posted by Coded-Dude

Either way the competition is good for all of us, and hopefully MS will do better testing on their next console venture. I am willing to bet they go above and beyond on the next hardware, because if they don't they might as well not even try - IMHO.

Absolutely 100% agree...well put.

[GFLPraxis]

Originally Posted by SpankyPenzaanz

well I would rather it cost THEM and not ME

Well, they would rather it cost YOU and not THEM

At least their paying for it. It's a decent thing to do. Isn't extending the warranty from 3 months to 1 year and then to 3 years (a 12x warranty extension) pretty much unprecedented? I don't recall Sony extending the warranty when PS2's broke down or Microsoft when the Thompson DVD drives broke on the original XBox.

Microsoft did make the right move launching early, as it put them way ahead of Sony and gained them a lot of exclusives and made them the base system for developers. They made the right move from a business perspective, anyway. Didn't help the quality of the product.