By Tim Ferguson, 6 July 2007 16:02
NEWS
Microsoft is facing a $1bn repair bill as it tries to appease Xbox 360 customers affected by a recurring fault that has blighted their gaming experience.
The company will repair or replace gaming consoles with the fault free of charge - including shipping - and estimates the costs will dent earnings by between $1.05bn and $1.15bn.
Microsoft has said it will extend the warranty coverage to three years for a particular hardware failure indicated by three flashing lights on the machine.
silicon.com Retail & Leisure
Get the latest retail and leisure news straight to your inbox. Sign up for the R&L newsletter today!
All other Xbox 360 warranty polices remain unchanged.
Customers who have already had to foot the bill for repairs related to the fault will also be reimbursed by Microsoft.
JupiterResearch analyst Michael Gartenburg told silicon.com: "This is almost an unprecedented situation, in terms of a company doing something like this for their customers in the consumer electronics space."
He continued: "[The cost will] be more easily absorbed by Microsoft than it would by other companies. But even for Microsoft, a billion dollars is still a billion dollars. So this is not a decision they've reached quickly or lightly."
But he added: "I don't think it's going to have a dramatic effect elsewhere [in the company]. Microsoft is a cash-rich company."
Microsoft said it views the number of faulty Xboxes as unacceptable and has corrected the hardware glitch after investigations revealed the source of the failure.
Robbie Bach, president of Microsoft's entertainment and devices division, said the problem has caused frustration for customers "and for that, we sincerely apologize". He added the costs are an investment in the Xbox customer base.
Comments
There is 1 comment. Join the discussion
1. Joe Whitehead
I thought the whole point of the console systems was that they only make money on the software, anyways?