Microsoft Takes $1 Billion Hit

Dennis Faas's picture

Microsoft put many Xbox users' minds to rest last Thursday, when the company announced that it would be extending the warranty on the Xbox 360.

The peace of mind won't come cheap for Microsoft, however, which will take a hit of just over $1 billion to provide the extended warranty.

"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. (Source:

The company said that the investigations revealed many factors contributing to problems with the console. In response, Microsoft has extended the warranty on the machines to three years. Microsoft also said that it has made unspecified design changes to the device.

The problems have plagued gamers since the 360 first shipped in November of 2005. A high number of users were coming across a common problem: three blinking red lights on the console, referred to as the "Red Circle of Death". The issue has been tied to overheating. (Source:

Although Microsoft initially downplayed the problems, it admitted last September that the batch of consoles it originally shipped were failing at a higher rate than expected. At that time, Microsoft extended what was then a 90 day warranty to a one year warranty and promised to reimburse customers who had already paid for repairs. (Source:

Then in April, Microsoft announced that it would no longer charge shipping on repaired consoles and would extend the warranty on those repairs.

A lot has changed in the past two years. Although it initially seemed that Microsoft was trying to pull the rug out from underneath gamers' feet, the company's 180 degree turn is beginning to convince customers that Microsoft is honestly trying to solve the problem.

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

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