Microsoft Corp, on Thursday, said it would take 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.
Microsoft is under pressure with mounting complaints about Xbox 360 failures on the Internet and growing expectations that Sony Corp could slash the price of its rival PlayStation 3 console at a video game exposition next week.
So far Microsoft has the lead on Sony in the battle for high-end video game machines, but it shipped only 11.6 million 360s by the end of June, compared with a target of about 12 million, Chief Financial Officer Chris Liddell said during a conference call with analysts Thursday.
Microsoft Entertainment & Devices Division President Robbie Bach said the timing of announcement about the charge for quarter ending in June and a new extended warranty were unrelated to any potential move by Sony. The hardware issue has marred a string of successes for Xbox 360, which has built an early lead over the PlayStation 3 with Microsoft’s strong lineup of games and popular online service.
Flashing red lights
But it is also finding increasing competition for some parts of its business, such as Apple Inc’s incursion into television shows delivered over the Web, which is also a feature of the Xbox online service.
Microsoft said it had investigated the sources of hardware failures indicated by three red flashing lights on the console and had identified "a number of factors" that can cause such failures. He would not say exactly how many Xbox 360s were returned.