Xbox repairs cost Microsoft $1B

[RUR]

Don't see this afternoon's news posted anywhere. From CNN/Money:
http://money.cnn.com/2007/07/05/tech...ex.htm?cnn=yes

LOS ANGELES (Reuters) -- Microsoft Corp. said Thursday said it would take a more than $1 billion charge to fix "an unacceptable number of repairs" to its Xbox 360 video game consoles and had missed shipment targets for the end of June.

etc.

[ussrelativity]

Ouch. That's not good.

[Ender]

So Microsoft claims 10 million consoles sold, with a maximum failure rate of 5%, or 500,000 bad units. The cost to repair these was a billion dollars, which works out to a repair cost of $2,000 per unit. Draw your own conclusions.

[GasCat]

They have been heavily citicized for losing so much money in the gaming industry. Now this thing came along. Wow!

They extended the warranty to three years too. More money, more money...

[calgarymarc]

Originally Posted by GasCat

They have been heavily citicized for losing so much money in the gaming industry. Now this thing came along. Wow!

They extended the warranty to three years too. More money, more money...

So how do you get your $$$ back if you had to pay to have a console repaired/replaced?

[sc7]

So much for all of Microsoft's "Running in the black by the end of the year" eh?

[dialog_gvf]

Originally Posted by Ender

So Microsoft claims 10 million consoles sold, with a maximum failure rate of 5%, or 500,000 bad units. The cost to repair these was a billion dollars, which works out to a repair cost of $2,000 per unit. Draw your own conclusions.

Something's wrong there, huh?

If you assume they spend $250 per unit fixing it, that means they expect 4 million repairs!

Gary

[desmond]

Originally Posted by Ender

So Microsoft claims 10 million consoles sold, with a maximum failure rate of 5%, or 500,000 bad units. The cost to repair these was a billion dollars, which works out to a repair cost of $2,000 per unit. Draw your own conclusions.

"industry standard 3 to 5%."


that statement will cost them big time!

[dialog_gvf]

Originally Posted by GasCat

They have been heavily citicized for losing so much money in the gaming industry. Now this thing came along. Wow!

They extended the warranty to three years too. More money, more money...

And they've also been crapping on Sony for losing money on the PS/3, but Sony appears to have made the PS/3 extremely well right out the gate.

Gary

[bigmf]

Sounds to me like the auditors told the CFO that they need to accrue some liability for the warranty repairs.

Pure speculation only.

[WriteSimply]

This is probably why Microsoft didn't want to do an XBox 360 product placement on The Ring and Ring 2. It's just spooky coincidence.

I'm sure Aaron and other Photoshop wizards can whip up a composite pic of the film's poster and The Ring Of Death.


fuad

[bigmf]

I just started thinking about the amount. $1 billion is a metric crapload of money. At $400 a repair that is 2.5 million units. That would be assuming that it is a full replacement. If its $100 per repair, that is 10 million repairs or essentially all of the sold boxes internationally. You do not accrue a warranty liability for items not yet sold. So the billion is on the x-boxes that are out in the wild. To me it says that every x-box out there will soon become an ex-box.

[What'sHD]

Originally Posted by bigmf

I just started thinking about the amount. $1 billion is a metric crapload of money. At $400 a repair that is 2.5 million units. That would be assuming that it is a full replacement. If its $100 per repair, that is 10 million repairs or essentially all of the sold boxes internationally. You do not accrue a warranty liability for items not yet sold. So the billion is on the x-boxes that are out in the wild. To me it says that every x-box out there will soon become an ex-box.

har, good one

2.5M units as replacements comes in at 25% fail-rate. Less than 400 bucks for repair/console and we are talking even higher %ages.

Can open, worms everywhere...

[ReduxInflux]

after the ps1, i gave up video games only to return to them when all the dudes in my dormitory at school got into HALO. didnt know what an xbox was but after playing the game, i caved and bought one. thought it was a great system. naturally, i purchased the 360 when that came out. being that it was way too expensive for what it gave me in return, i purchased it new on ebay for 300. still too pricey but my bro and i went half and half. 6 months later, the blinking red halo came on. called microsoft and they asked us to send it back to be fixed at which point they promised it would be replaced if it was beyond repair. sure enough it was and they sent me a 'new' one alright...but by new they meant refurbished...(you can just tell) ever since, ive been a little nervous about it (though it plays fine, it sounds like a maraca when you pick it up and give it a little shake). just over a month ago, i bought a ps3 after the guys i work with kept talking up its superior machinery (its all they would talk about). convinced and out of fear that my 360 might fail, i bought one. and in my unbiased judgment, the ps3 is a much better quality machine (maybe thats stating the obvious considering its blu-ray and wi-fi capabilities) but i must say that the games are lacking. however, i'm extremely pleased with it)

[sc7]

^^
I had the same thing. I bought a 360 soon after launch, basically for H3. After the disappointing demo, and hardware issues, and lack of HD media, I traded it in for a PS3. Been happy ever since.

[What'sHD]

10M of them left MS and now all 10M are heading back. No wonder its called 360.

Coincidence, I think not.

[bigmf]

A couple of other thoughts to chew on. The $1 billion does not include warranty costs expensed from launch until now. These are costs that they expect to spend repairing or replacing x-boxes that are currently out there. How much have they spent so far? The SEC often looks at big accruals so you know that Microsoft will have the number well supported and have their auditors on board when the letter comes. I think we can safely put behind us the comparison of the PS1 overheating and PS2 DREs. Sony never had to put up a $1billion accrual for warranty costs on either machine and sold 10x the number that XB360 currently has.

[Maximus]

Originally Posted by desmond

"industry standard 3 to 5%."


that statement will cost them big time!

Expect class-action suits, same as what Sony had with the PS2 laser problems they kept denying for God knows how long.

[dialog_gvf]

Originally Posted by ReduxInflux

called microsoft and they asked us to send it back to be fixed at which point they promised it would be replaced if it was beyond repair. sure enough it was and they sent me a 'new' one alright...but by new they meant refurbished...(you can just tell) ever since, ive been a little nervous about it (though it plays fine, it sounds like a maraca when you pick it up and give it a little shake). just over a month ago, i bought a ps3 after the guys i work with kept talking up its superior machinery (its all they would talk about). convinced and out of fear that my 360 might fail, i bought one. and in my unbiased judgment, the ps3 is a much better quality machine (maybe thats stating the obvious considering its blu-ray and wi-fi capabilities) but i must say that the games are lacking. however, i'm extremely pleased with it)

The games are lacking, but the question would be how were they on the Xbox 360 LAST July?

I wonder how all this talk about reliability and "certain" failure is going to affect Xbox 360 users in general. How many are losing enjoyment with the system because of fear of impending ring, despite the consolation it will be repaired?

Gary

[bluflu]

The Xbox news is all over my local airwaves.