Microsoft $1 Billion in the Red for Xbox Repairs

If you can believe Reuters, Microsoft Corp. said yesterday that on 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.

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 Redmond 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 on Thursday.

Robbie Bach, president of Microsoft's entertainment and devices division, said the timing of the announcement about the charge for the quarter ending in June and a new extended warranty were unrelated to any potential move by Sony.

"This is just one of those things that happens when it happens," Bach said in an interview. "We reached our conclusion early this week and because it's a financially meaningful issue we had to announce it immediately."

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.

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.

http://www.nytimes.com/reuters/technology/business-microsoft-xbox.html?
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