Xbox 360 Repairs Will Cost Microsoft $1B

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Microsoft to Take $1B Charge for Xbox 360 Warranty Extension

http://biz.yahoo.com/ap/070705/microsoft_xbox_warranty.html?.v=10

Yahoo Finance said:
SEATTLE (AP) -- Microsoft Corp. said Thursday it expects to spend more than $1 billion to repair widespread hardware problems in its Xbox 360 video game console after a large number of them broke down.
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Microsoft said it would extend the warranty on the Xbox 360 to three years after too many of the consoles succumbed to "general hardware failure," but the company provided few other details about the extent of the problems.
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  • Microsoft said it will record a charge of up to $1.15 billion for its fourth fiscal quarter
  • a $1 billion write-down for one division in one quarter is significant
  • Microsoft will pay for shipping and repairs for three years, worldwide, for consoles that experience hardware failure
  • Microsoft's entertainment and devices division reported an operating loss of $315 million on $929 million in sales for the three-month period that ended in March.

 
And $6 billion in losses for the whole division since 2002 (compared to 1 billion in just one quarter, ouch). Which makes me think, will MS ever turn a profit? Even with all these repairs on the horizon? Or will they pack their bags and the 360 will be the last console they will ever make due to losses?
 
AeonF1 said:
And $6 billion in losses for the whole division since 2002 (compared to 1 billion in just one quarter, ouch). Which makes me think, will MS ever turn a profit? Even with all these repairs on the horizon? Or will they pack their bags and the 360 will be the last console they will ever make due to losses?
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Well they've said they're in it for the long hall, and I think they predicted they wouldn't be pulling in profits for quite some time, when they first entered the gaming world. They are currently losing money, but I think the rest of the company, as a whole, is able to offset their current losses. I think Sony knows full well how that goes, as some of their divisions have cost the company money.
 
I think that's an inflated PR number personally. First, it's what MS is announcing as an estimate, so its not a hard number. Two, it's coming from them, and saying "we care about our customers to the tune of one BILLION DOLLARS (cue Dr. Evil with his pinkie in his mouth)".
 
Yeah, it's not going to cost that, plus they'll probably use it as a way to mess with their stock value to make some cash too. That said, they still reckon they're on for profitability... who knows how.
 
Im happy their are extending the warranty again but I bet they are kicking themselves now for not taking the time to spot and fix the problem before release.
 
I think BG will shake out his mattress and 1 Billion will fall out..At least now I feel more confident with my 360 instead of having to baby it.
 
Technoob said:
I think that's an inflated PR number personally. First, it's what MS is announcing as an estimate, so its not a hard number. Two, it's coming from them, and saying "we care about our customers to the tune of one BILLION DOLLARS (cue Dr. Evil with his pinkie in his mouth)".
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The flip side of that is that stockholders don't like hearing a high figure so it could be even more.
 
They just extended their warranty to 3 years, this is why its expected to cost this much.
 
Whats the whole point of them being in the business if they are going to be losing money all the time with no profit. The only reason i see if they aren't making a profit is if this is Bill Gates hobby and he wants his name to be heard in the living room lol.
 
no matter what the price is, its cool they are fronting alot of money

and from the looks of it, Bill doesn't care what it costs him, he just wants to be in the gaming scene, even if it makes him go broke!
 
Recognize that Microsoft is looking at this from the long haul. 5, 10+ years down the line, if they're the juggernaut in the console game then they'll have made a wise decision. In the long term, I think Microsoft will turn a profit. Even more importantly, they feel that this will allow them to corner the market on ALL gaming with their LIVE service.

I don't think Games for Windows and Live will ever take off on the pc. However, I think this will turn into a footnote of one of the most successful console manufacturers around.
 
Initially, they expected the 360 to be operating in the black in 2008. Obviously, that time is being pushed back. Considering that though, it looks like Microsoft will eventually make a profit on the 360, but it's going to be another year or 2 more than they initially projected. I think the extra $1B loss will be enough for them to make sure they get the design right on the next xbox or 360 redesign (if they do one).
 
XBOX 360 still has a 1 year (2yr where applicable) warranty

3 year on RROD
 
Well...MS can afford a billion dollar loss is the bottom line.

They did brute force their way into the console market in the first place, after all.

Since reliability is the only real complaint about the 360...they'll be golden once they get this all behind them.
 
Technoob said:
I think that's an inflated PR number personally. First, it's what MS is announcing as an estimate, so its not a hard number. Two, it's coming from them, and saying "we care about our customers to the tune of one BILLION DOLLARS (cue Dr. Evil with his pinkie in his mouth)".
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its a financial report for their stockholders. its an estimate to the best of their ability. i doubt they're grandstanding here.
 
over the last 6 months or so.. after getting a 360.. i've grown fond of microsoft to be honest... i know i know...
 
They cost $129 to repair, so that's 8.9 million have gone, or are expected to go bad. They've made 11.6 million so far. That's about a 77% expected failure rate.
 
Conker said:
Whats the whole point of them being in the business if they are going to be losing money all the time with no profit. The only reason i see if they aren't making a profit is if this is Bill Gates hobby and he wants his name to be heard in the living room lol.
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actually you're right. dolla bill said he wanted MS to be a household name and he wanted microsoft to take over the living room. microsoft hardware, microsoft software, microsoft middleware, and microsoft services all probably controllable from your windows pc or your windows mobile smartphone. shit they're even been deals with some care manufacturers to put windows mobile in some automobiles
 
BladeVenom said:
They cost $129 to repair, so that's 8.9 million have gone, or are expected to go bad. They've made 11.6 million so far. That's about a 77% expected failure rate.
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With financial forecasts for things like warranties they have to predict the worst possible case... that's the number you see there.
 
Psychotext said:
With financial forecasts for things like warranties they have to predict the worst possible case... that's the number you see there.
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I would also venture to say it doesn't really cost MS $129 for each repair. I am sure it is quite a bit less than that in out-of-pocket costs. I guess it could be seen as lost profits for each system that they repair that they previously would have charged for, but the cost of "good will" in business really is invaluable. So they will surely take a hit in the pocketbook now, but I think they will make up for it in the additional sales they will get from people that purchase in light of the new policy.
 
Lets look at it this way, they have already lost money for 1 year, they are predicting losing money for another year. Given that it will take at least 2 years for them to break even on the 360, at which point it will be at the end of its life cycle. Net cost for them: essentially nothing, net gain for them: staying a top contender in a booming industry.

Microsoft knows what it is doing. Sony... I am not so sure. Sony is cocky and arrogant and it will hurt them
 
haha xbox has a 33% RMA rate. that's pretty bad.
microsoft's plan on selling crap hardware and capitlizing on the exclusive titles may backfire.
 
BladeVenom said:
They cost $129 to repair, so that's 8.9 million have gone, or are expected to go bad. They've made 11.6 million so far. That's about a 77% expected failure rate.
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It may very well cost MS more tha 129 per repair

Man the call center
Pay the phone bills for the toll free number
Man the repair center (mgmt, workers/health insurance etc)
Purchase a new motherboard/cpu whatever is wrong with the unit
Organize the shipping - pack the xbox
Pay shipping both ways

$129 dollars isn't very much money when you consider labor costs alone for all the people that have to be involved. The $120-129 number may just be a break even number that MS estimated.

I applaud MS for standing behind their product. They recognize and admit a problem and are working hard to fix it + standing behind their consumers and supporting loyalty.

The Xbox 360 and everything associated with it - good and bad has made my opinion of MS go up --- not down, and despite the fact that I myself got the three red rings of death a couple months ago.

My xbox was sent in/fixed/sent back in about 2 weeks or so. They included a free month of Xbox live and a nice coorporate letter of apology. Can't ask for much more.
 
hardc0re said:
haha xbox has a 33% RMA rate. that's pretty bad.
microsoft's plan on selling crap hardware and capitlizing on the exclusive titles may backfire.
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MS had NO plan to sell crap hardware --- as evidenced by them backing their product with a this new three year warranty...I shouldn't have to explain this. You bought the product up front with a 90 DAY WARRANTY...you bought it knowing you had only a 90 day warranty. MS had no reason to fix it for free after 90 days. They saw some problems in their intial hardware, they agreed it failed too often/MORE THAN EXPECTED and what they deemed appropriate. They extended the warranty (retroactively even) to all units for 1 year. The problem continued (unexpectedly) they graced the customer with a 3 year warranty (retroactively). You have absolutely NOTHING to complain about.

THINK before you say stuff people...These forums sometimes are pathetic.
 
lol archaea calm down i think i hit a nerve there.
back on topic, If they did not offer the extra warranty, they would be sued into bankruptcy. It is unacceptable for these units to last for so little time, it would tarnish their name so badly.
 
I heard microsoft might back out of the console business if sony backs out since the major reason i heard they went in was because sony was going to take over the living room they feared so they had to strike back some how since they dreamed of connecting the whole house with microsoft products. They even got windows ce in some cars in the dash. Thats sonys and microsoft objective, it isn't 100% gaming but they wanted their foots in the door to do other things. Thats why microsoft is losing the billions and millions lol. If it was just for games then they would have already backed out. To me microsoft and sony will have to rethink their stategies because if they aren't going to make a profit at all whats the point of staying in the business lol. Corporations don't do stuff for charity thats for sure ;)
 
hardc0re said:
If they did not offer the extra warranty, they would be sued into bankruptcy
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Doubtful. Have you seen the sort of crappy settlements you generally get for class action suits on non-health and safety hardware failure problems? It cost MS a ton more to do it this way than it would have to lose a few class action suits.
 
Still sitting here waiting for the ones that don't break. I can't believe they haven't fielded a major redesign yet.
 
Archaea said:
MS had NO plan to sell crap hardware --- as evidenced by them backing their product with a this new three year warranty...I shouldn't have to explain this. You bought the product up front with a 90 DAY WARRANTY...you bought it knowing you had only a 90 day warranty. MS had no reason to fix it for free after 90 days. They saw some problems in their intial hardware, they agreed it failed too often/MORE THAN EXPECTED and what they deemed appropriate. They extended the warranty (retroactively even) to all units for 1 year. The problem continued (unexpectedly) they graced the customer with a 3 year warranty (retroactively). You have absolutely NOTHING to complain about.

THINK before you say stuff people...These forums sometimes are pathetic.
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Nothing to complain about? Man I can think of so many products I have purchased that have lived much longer than what their warranty covered. I am probably not the only person that has decided to not purchase an X360 until these failure rates are fixed.

I know there are many people that are still gaming on their original boxes, but I'm not willing to shell out that kinda cash risking to be one of those people going on their 3rd or 4th boxes. I know some people love their X360 so much, but I'm the type of person that would feel really cheated if I spent 300+ bucks on something and it dies so close to the expiration of its warranty. I would have such a foul taste in my mouth that I wouldn’t really consider buying another one. I'm surely not the only one that feels that way and if enough people feel this way, could be a bad thing for M$.
 
No kidding. 90 day warranty? That was just assinine to begin with. They knew there were problems and they expected that many of the systems wouldn't last much longer than 90 days and they were hoping that 90 day period would help them save alot of money on repair costs. They then realized hell....there were going to be ALOT more crashing systems than they initially imagined and there were going to be a ton of people that caught on to this whole "90 days warranty" scam BS. Only THEN did they choose to bite the bullet and increase the warranty period.
As far as a class action lawsuit, there hasn't been one due to lack of organization. There might be some website that I don't know about, but all I have seen is a few people here and a few people there complaining. No organization of a large mass of people getting things together.
 
Has anyone done the math on how many consoles can be repaired for 1 billion dollars? I've heard some people paying $125 to get their 360s fixed (out of warranty), and others paying $75, so im not sure what they charge, but im sure it costs no where near even $75 to repair (i cant believe reseating the CPU or throwing down some soldering costs much more than a few bucks.)

But even going by $75 as what it costs MS to repair a 360, thats 13,333,333 consoles. There arent even that many consoles out there right now is there? use a lower more realistic cost figure and the number becomes staggering.
 
they charged $140 before the announcement. $99 after.

its not just parts and labor. its shipping each way as well.
 
JSC450 said:
Has anyone done the math on how many consoles can be repaired for 1 billion dollars? I've heard some people paying $125 to get their 360s fixed (out of warranty), and others paying $75, so im not sure what they charge, but im sure it costs no where near even $75 to repair (i cant believe reseating the CPU or throwing down some soldering costs much more than a few bucks.)

But even going by $75 as what it costs MS to repair a 360, thats 13,333,333 consoles. There arent even that many consoles out there right now is there? use a lower more realistic cost figure and the number becomes staggering.
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I disagree with you - -- - read post 27 in this thread.
 
Archaea said:
I disagree with you - -- - read post 27 in this thread.
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It's not just that, the number people keep saying OMG about is a FORECAST on what it could possibly cost them OVER THE LIFE OF THE CONSOLE. This isn't what it has cost them so far and it's not what it will cost them over the next year.

Bleh.
 
Psychotext said:
Doubtful. Have you seen the sort of crappy settlements you generally get for class action suits on non-health and safety hardware failure problems? It cost MS a ton more to do it this way than it would have to lose a few class action suits.
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A friend of mine who's an attorney in Public Interest law (and ironically, the most honest man I've ever met), says that the sole purpose of a Class Action Lawsuit is to enrich the bank account of the lawyer prosecuting it. Typically the consumer gets a *sliver* of the total settlement simply because there are SO many participants in these kinds of cases. You're lucky to get a few bucks back, meanwhile the lawyer who got the case certified is buying half a dozen new vacation homes, paid for in cash.
 
heres an interesting article from kotaku, stating why there are problems with the 360s. just another view from another perspective. http://www.smarthouse.com.au/Gaming/Console/L3R2T2S6?page=1
(excuse the title of the article)
while i'm not sure how credible the article is, its still interesting. (i'm not attacking the 360 or any of the sort, i own one myself and i just thought it was a good read)
 
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