Xbox red ring of death

On July 2007, Microsoft said that it was taking a $1 billion plus charge against earnings to extend the warranty of all the Xbox consoles because of an “unacceptable number of repairs”. Microsoft said that this was caused by the design flaws in the video game machine.

During a conference call with the financial analysts and reporters; Robbie Bach, the head of Microsoft’s entertainment division and CFO Chris Liddell announced the warranty change and told about the financial impact on the company.

Robbie Bach turned to the matter on hand and said, “But there’s one area of the business where we are not doing good enough”. He added, “Over the past couple of months, the number of repairs for the Xbox 360 consoles has been unacceptable to us”.

Under the new warranty, any Xbox 360 that shows the three flashing red lights, the error signal for “general hardware failure” also called as “red ring of death” by some users, will be repaired free of charge for up to three years from its date of purchase with the shipping included, said Bach.

To pay for the anticipated repairs of the consoles and fix the ones that are still on production in the inventory, Microsoft said it could take a $1.05 billion to $1.15 billion charge against earnings for the quarter ending June 2007. Chris Liddell said that the charge would equally split between the repairs of sold Xbox systems and to fix that are still in stock.

“This will have no impact on outlook for fiscal year 2008” said Liddell. “We are on track of profitability for both the Xbox and the entertainment group overall”, he said.

Microsoft wouldn’t specify the exact causes of the hardware failure but they said that there are several factors that could trigger the error and they said that, “It is not related to any safety issues”.

Bach said, “Microsoft takes full responsibility for the problem. Our suppliers have done good work and we will continue to work with them. Think of it as a Microsoft design challenge”. 

REFERENCES:

http://www.computerworld.com/s/article/9026340/Xbox_360_red_ring_of_death_costs_Microsoft_more_than_1B?taxonomyId=15&pageNumber=2 (accessed on 20/05/2013)

http://www.lookatbowen.com/2010/05/xbox-360-red-ring-of-death-a-free-fix (accessed on 20/05/2013)