“The infamous Xbox 360 ‘red ring of death’ (indicating a failed unit) has caused Microsoft – and its customers – untold pain in the three years since the console’s launch in 2005, and cost it $1.15bn (£738m) last year. Microsoft has never said publicly why the console was plagued with faults: it seems that poor production quality was at the heart of the failures – an all-round problem with no single cause except impatience on the company’s part as it tried to become the leader in videogame consoles,” Dean Takahashi reports for The Guardian.

“With the first Xbox, the company lost $3.7bn (£2.3bn) over four years, mostly because costs of the box – particularly its hard drive – were too high. Bill Gates didn’t really care about the losses; that was simply the ante for getting into an exciting new business. But Steve Ballmer, who took over from Gates as chief executive during the first generation, really wanted the Xbox business to be profitable second time around,” Takahashi reports. “Even though early testing showed that production machines had flaws, Microsoft didn’t delay the launch because it believed the quality problems would subside.”

“Some of the defects were latent, potentially not showing up for some time after the machine was used. Up to 50% of all defects can be latent. And production yields – the number of machines coming off the production lines that passed testing – were low. In August 2005, the machines’ aggregate defect rate – from Microsoft’s contract manufacturers Flextronics and Wistron, in their factories in China – was allegedly just 68%” Takahashi reports.

“In a memo dated August 30 2005, the team reported overheating graphics chips, cracking heat sinks, cosmetic issues with the hard disk and the front of the box, underperforming graphics memory chips from Infineon (now Qimonda), a problem with the DVD drive – and more,” Takahashi reports. “Microsoft has never disclosed its actual return rates. But according to data obtained by VentureBeat, the total number of returns climbed above 1.2m consoles early last year. That is a huge figure, considering Microsoft had only shipped 11.6m consoles to stores by the time of the writeoff in mid-2007.”

“Nintendo’s Wii has outstripped rival consoles around the world, having sold some 35m machines since its launch at the end of 2006. Microsoft has sold about 22m Xbox 360s since its 2005 launch, while the Sony PS3, which came late to the party with a European launch in March 2007, has sold 16.6m consoles around the world,” Takahashi reports.

The full heartwarming article – recommended – here.

[Thanks to MacDailyNews Reader “Denis” for the heads up.]