Microsoft Owns Up to Xbox 360 Quality Issues

By Ed Oswald, BetaNews

July 5, 2007, 6:02 PM

Microsoft admitted that failure rates for Xbox 360 consoles were an issue, saying it would extend the warranty period for any consumer that had experienced a general hardware failure.

Known by users as the "three red lights of death," as many as 3 out of every 10 consoles were experiencing some type of problem, according to sources. In turn, Microsoft said it would take full responsibility for the issues.

To repair their console, anyone who had experienced the issue would have their warranty extended to three years from the date of purchase, and any who had paid for out-of-warranty repairs for general hardware failures would be reimbursed. Shipping costs would be included in the repairs.

In total, the effort will set Microsoft back $1.05 to $1.15 billion in the second calendar quarter. The charge would be deducted from that quarter's earnings.

"This problem has caused frustration for some of our customers and for that, we sincerely apologize," Microsoft's entertainment chief Robbie Bach said. "We value our community tremendously and look at this as an investment in our customer base."

Analysts applauded the move, saying it was necessary in order to stave off future negative press regarding the subject, and smart for the company's image overall.

"That's a good move for them and it's an important step to take. It's nice to see a company owning up to issues and taking responsibility for them although at this cost it's certainly painful, even for Microsoft," JupiterResearch analyst Michael Gartenberg said.