Xbox 360 unreliability costs Microsoft $1 billion

Xbox 360 unreliability costs Microsoft $1 billion

Summary: Will Micrsoft's Xbox ever turn a profit?

TOPICS: Microsoft

Microsoft's Xbox 360 games console just took a huge step away from profitability yesterday when the company announced that it will take a $1 billion charge to cover manufacturing defects and the additional burden of giving consumers an extended warranty.  Will the Xbox ever turn a profit?

Microsoft's quite used to fixing problems retrospectively, but it seems that hardware repairs are a lot more expensive than pushing out software updates for buggy software.  In particular, the "three flashing lights error message of death" has caused gamers a significant amount of headache, with some having to return their consoles to Microsoft for repair several times.  Microsoft now claims to have identified “a number of factors” which contribute to the consoles unreliability, although it declined to comment on what these factors were.  I guess a billion is the cost of rushing a games console out of the door without carrying out proper reliability testing.

The game console market has changed considerably since Microsoft entered it with the Xbox.  Instead of sharing the market with Sony, both companies are being hammered by the infinitely more fun (and very reliable) Nintendo Wii. The Nintendo Wii proves that not only can you grab a large market share quickly, you can make money doing so.

Still, Microsoft claims that the Xbox can be profitable by 2008.  Given this latest charge, I really doubt this.

[poll id=155]


Topic: Microsoft

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  • Microsoft's $1 billion tube of haemmoroid cream...

    to soothe the burning ring of death...

    I think Microsoft used the same people to apply the thermal compound to their GPU's as Apple did with the MacBook storage heater.
    • Thermal Paste

      Fixing the badly applied thermal paste in a small number of a first rev product didn't
      cost Apple a BILLION dollars. Those machines get a bit hot, but they're still very

      Microsoft is not a hardware company and they're not much of of a software company
      either. I mean, they've got tons of really smart people but their corporate culture has
      always been one of compromise in the QC department. Their stuff has never raised
      above the level of "good enough." Zune was another good example.
      • The reason it didn't cost Apple a billion dollars...

        is because Apple didn't sell anywhere near as many Macbook starage heaters as MS sold XBOX360's.
        I wonder what the ratio was. 100:1 1000:1 10000:1?

        Apple is flawed as a hardware company (see and flawed as a software company (see Quicktime, Safari for Windows / Mac / iPhone).

        I guess they have much in common...
        • No MacBooks failed.

          The machines ran hot, but in spec.

          In 2006 MS sold 10 million Xbox 360s at a loss of about $100 per box.

          In 2006, Apple sold 2 million MacBooks and iBooks at a profit of about $250 per machine.

          If it weren't for drones like you buying Windows and Office, MS would have been out of business years ago.
        • Sure hope you are not in buisness

          Or a tech field.

          Scrat posted
          > "I wonder what the ratio was. 100:1 1000:1 10000:1?"

          Can't even do any basic research (you are so far off as to be funny). Note: I don't
          count the untold 1,000,000's of XBoxes sitting on a store shelf wanting an owner.
          • I'll do research when you learn to spell

            [i]"...Sure hope you are not in [b]buisness[/b].." << and this would be your example...

            It is not my job to educate people like you Bruizer. If you want the numbers of how poorly Macs sell then Google is your friend.
  • None of the above

    Thanks very much, I prefer real life.
    Yagotta B. Kidding
  • Parallelism

    Microsoft's inability to address parallelism beyond 3 or 4 cores is starting to put
    them behind. The easier dev path for the XBox was a gamble that may have payed
    off, but this is a huge setback. I run a multiprocessor G5, the very same
    architecture on which the XBox is based. It was clear to me that the XBox 360's
    form factor was far too ambitious.

    At a time when the PS3 has begun to reward programmers for climbing the
    multicore learning curve, the 360 encouraged them not to. They have
    subsequently hit the thermal wall. Hosing this thing with thermal paste won't help,
    there is no room for another fan, and it's too loud already, switching to liquid
    cooling at this late stage is an engineering nightmare. There are two possible
    solutions, throttle back the CPUs, or change the form factor from "inhale" to
    "exhale". I wonder if Microsoft will be forthcoming about the upcoming

    This news of a financial loss is one thing. What it means for the future is another.
    By all accounts MS had achieved some great things with the platform and XBox live
    in particular. It's too bad. The hardware failure is just one of the two problems

    The larger and further reaching issue is the failure of software. A software strategy
    that encourages stasis over progress is paying a price. It arrived at an obvious
    threshold, then pushed it's luck.
    Harry Bardal