Xbox repairs cost Microsoft $1B

[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 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.

[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...

[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

[WriteSimply]

Originally Posted by 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

Well, since nobody here wanted to do it...

OR




fuad

[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!

[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.

[aaronwt]

Originally Posted by Maxpower1987

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

Why would there be a class action suit? MS has extended that warranty and they honor the warranty. There is nothing to to sue over if MS honors their warranty. Any problems would be fixed. Hence the 1 Billion to cover future repairs with the 3 year warranty. That's a heck of a warranty.

[partridge]

http://www.theregister.co.uk/2007/07..._death_charge/

"Some 30 per cent of Xbox 360's are estimated to overheat heat and fail"

[Maximus]

Originally Posted by aaronwt

Why would there be a class action suit? MS has extended that warranty and they honor the warranty. There is nothing to to sue over if MS honors their warranty. Any problems would be fixed. Hence the 1 Billion to cover future repairs with the 3 year warranty. That's a heck of a warranty.

Because they have knowingly sold a substandard product, warranty or not.

[Shin-Ra]

Originally Posted by Maxpower1987

Because they have knowingly sold a substandard product, warranty or not.

Exactly, plus it's not just a case of "oh my 360 died *dingdong* oh look there's a courier at the door with a replacement console for me, how convenient!"

It's a serious pain in the arse phoning up MS support, getting them to accept that the failure wasn't caused by you - e.g. reorientating the console while switched on (YES - they tried that one with me ) waiting for the box or printing a label to stick on your OWN box if you live in the UK, phoning them up again when the label e-mail doesn't arrive, realise they didn't take your details down properly so you have to give them again.. it goes on and on and will be worse with all the extra returns they're going to be dealing with now that more people are within the warranty period.

[aaronwt]

Originally Posted by Shin-Ra

Exactly, plus it's not just a case of "oh my 360 died *dingdong* oh look there's a courier at the door with a replacement console for me, how convenient!"

It's a serious pain in the arse phoning up MS support, getting them to accept that the failure wasn't caused by you - e.g. reorientating the console while switched on (YES - they tried that one with me ) waiting for the box or printing a label to stick on your OWN box if you live in the UK, phoning them up again when the label e-mail doesn't arrive, realise they didn't take your details down properly so you have to give them again.. it goes on and on and will be worse with all the extra returns they're going to be dealing with now that more people are within the warranty period.

The one problem I had showed a very responsive MS. The box replaced very quickly. And my extended warranty was extended. Although this was December 2005.
When I called MS the other day to get the extended warranty on my Elite, I had no problem getting connected to someone.

[ps3andlovinit]

Originally Posted by aaronwt

Why would there be a class action suit? MS has extended that warranty and they honor the warranty. There is nothing to to sue over if MS honors their warranty. Any problems would be fixed. Hence the 1 Billion to cover future repairs with the 3 year warranty. That's a heck of a warranty.

Maybe one heck of a warranty but it's also an acknowledgement of a big problem IMO. Who wants the hassle. Especially given the multiple failures.

One aspect is they are only covering RROD..and there are other problems like the drive read problems etc. Maybe more. So it's not gone but this action certainly reduces the chances of happening around the RROD.

I'd would say this was an effort to minimize the fallout /possibilities of a class-action suit. I'd imagine there was behind the scenes pressure from watchdog/gov't groups for a total recall ..again this was a pre-emptive/back to the wall response to avoid that.

Now here is another part to the story...

They already increased the warranty once..acknowledging a problem. I thought around that time MS exec(s?) said the failures were within accepted industry standards. IF there is evidence that a high failure rate was know or suspected when they made public statements to the contrary..it's more likely a suit/charges will come from the SEC or shareholders for misleading investors than a class-action suit. The extended warranty will minimize the likely hood of a successful class-action suit for the RROD..but does nothing to shield people from the SEC etc.

Representatives of PUBLIC COMPANIES have to be very careful about the information they reveal or they can go to jail for manipulating the markets. Much worse for individuals than a class-action lawsuit. Given the losses and potential hit on shares..shareholders would have different reasons for filing than the SEC..the SEC would see gains or losses as equal reasons to lay charges.

[partridge]

Weren't MS supposed to be turning a profit on the Xbox project for the first time this year? Does this affect that?

Lots of people think MS are invincible because of their wealth, but they have shareholders to answer to. So what with this and the apparent failure of the Zune, MS are looking a little uncomfortable right now.

I honestly believe that as we move into the second half of this year and into 2008 the 360 sales will begin to drop as PS3's increase. Just look at what PS3 has coming later this year, not just games but on blu-ray movie too. Spiderman3 has just been given a date for October and I've pre-ordered it already.

Supposedly MS has shifted just 150,000 HD-DVD add on drives in the States, that's compared to the 5 million consoles sold - not much of an attachment rate.