Microsoft takes a $1 billion hit for Xbox 360 console problems

After a rash of recent reports about Xbox 360 hardware problems, Microsoft has opted to extend Xbox 360 warranties to three years, at a cost of approximtely $1 billion.

After a rash of recent reports about Xbox 360 hardware problems, Microsoft has opted to extend Xbox 360 warranties to three years.

The company announced its plan to extend Xbox warranties on July 5.

The upside: Microsoft has done what's right for customers, by reimbursing anyone who has experienced the "three flashing red lights" error and incurred repair expenses. The downside (for Microsoft): It is taking a $1.05 to $1.15 billion charge for its quarter ending June 30 to make good on reported hardware problems.

Microsoft officials have said they believe Xbox hardware failure rates to run between three and five percent, which the company considers acceptable. But some retailers claim the Xbox console failure rate to be substantially higher, approaching 33-plus percent.

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