“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.]
Remember any Windows version before Windows 95?
Hell, remember DOS?
Remember the 10,000 bugs in Windows 95?
Hell, remember them charging for those bug fixes AKA Windows 98?
Remember Windows Me?
Hell, remember Windows Vista?
Remember Zune?
Remember Microsoft screwing all their PlaysForSure partners?
Remember XBox 360?
No one screws up like Microsoft screws up.
Now get out of your Mother’s basement and find a job!
well, it turns out hard core gamers are so addicted to their favorite XBox exclusive games that they keep buying it anyway, even if they have to go through dealing with defective units. And MS has pushed down the price a lot more than Sony can to keep that hard core user base loyal and growing, thanks to its huge profits elsewhere.
so MS clearly sees the XBox as a “loss leader” to work their way into the living room and connect consumers with Windows Live etc. for a much larger MS agenda than gaming.
but the problem is, nobody but hard core gamers buys and uses the thing. it is perceived as too one-dimensional a product, and not for “grown ups.”
Nobody – not MS, not Sony, not Apple, not HP, not AT&T;or whoever – has yet created the “killer box” that will that will conquer the living room by letting you effortlessly live your entire media/communication/entertainment/web life sitting on the sofa.
pretty soon tho.
Halo 3 is the only reason many people even bought the 360.
@master chief
Keep in mind the folks at Bungie were going to put Halo on the Mac first until MS got scared and bought Bungie.
I still miss Marathon ;(
“Nobody – not MS, not Sony, not Apple, not HP, not AT&T;or whoever – has yet created the “killer box” “
MS has sold 22 million consoles which is a hell of a lot better than AppleTV.
@ me
What part of “With the first Xbox, the company lost $3.7bn” don’t you get?
That’s about $170 a box… the “X” in Xbox stands for is the unknown amount of money this thing will cost Microsoft.
Sucks for Sure, at least MS is reliable in one area.
Maybe Steve Ballmer should put an Xbox on his head and let Ted Nugent use his bow an arrow to shoot a turd.
If Ted misses his mark it won’t do any damage to a piece of valuable electronic landfill.
@KillBill
And now they’re making buckets of money from the XBOX 360. They’ve taken on a market that was dominated by Sony and after only two generations they are in a leadership position.
Give credit when it’s due.
@me
And now they’re making buckets of money from the XBOX 360.
Dude, like Microsoft, you’re in denial.
Microsoft has NEVER MADE MONEY FROM XBOX 360. Period.
What part of the story don’t you understand? The story said Microsoft LOST over a BILLION dollars just last year.
As for the leadership position, I believe the article clearly states the Wii is still in the lead.
IMO the Xbox still the best gaming console out there.
And Gears of War 2, just made it that much better.
Never fear, Pelosi’s, Reid’s, and Obama’s Microsoft et al bailout will restore balance in the universe. Too bad it won’t help balance your personal budget, stupid Americans.
@G4Dualie
Microsoft took a one off 1 billion dollar hit to cover the RROD last year. THAT DOES NOT MEAN THEY LOST ONE BILLION DOLLARS LAST YEAR !!!!!!
You guys need to get out a bit and look for other sources of news .
And while the Wii has sold more consoles the XBOX has sold more games which is where the money is.
Makes you wonder if IBM’s processor sales would have been more profitable had they just made what His Steveness had asked for.
the XBox is a modest success as a game console only, the PS3 is barely holding its own, while the Wii is a huge success. only Nintendo is making real money.
but that misses the point. the home game console market, no matter how you split up the sales and profits, is not the big prize. yes it is worth a lot of money – more than DVD sales – and yes hard core gamers live for nothing else.
but MS, Sony, CATV companies, and others including perhaps Apple, are fighting for market control of your entire digital living room and even beyond. that is the goal of Windows Live, and integrating the XBox into it as one of several supporting legs is what they really care about, not making a few bucks – or losing a lot – from XBox sales.
i’m sorry to tell you gamer folks, but you’re a sideshow in a much bigger evolving digital life-network market war.
the iPhone is Apple’s attack weapon in that war (with casual gaming instead of hardcore as one key feature). it could do damn near anything, but so far Apple has not come up with any bigger idea like Windows live to tie all its potential uses together in a digital life-network.
if i were Steve J, i’d buy Yahoo for that, but that’s off topic …
“Makes you wonder if IBM’s processor sales would have been more profitable had they just made what His Steveness had asked for.”
That’s right IBM gave up selling it’s power PC processors to Apple and all they’ve gained is Sony, Microsoft and Nintendo.
What a bad deal. hahahaha
And btw Microsoft sells more Xbox360s in one month than Apple has ever sold Apple TVs.
[Makes you wonder if IBM’s processor sales would have been more profitable had they just made what His Steveness had asked for.]
Certainly, it would have been more profitable. But then, they would have had to work. A lot of unnecessary ‘innovating’.
As it is, IBM can coast on the easy money sales of those three processors for FIVE years.
They no longer need to feel any guilt for having not promoted the PowerPC. Remember ‘Intel Inside’.
IBM and MOT. Yeah, great ‘partners’.
All IBM has for Apple these days, is a law suit over an employee. Pffffft!
And before anyone brings up the Mac clone disaster, let me remind those that the cloners WERE NOT ‘expanding’ the Mac marketplace as they had agreed to do. But, were instead eating Apple’s sales. They did not create NEW Mac customers, but grabbed easy sales from ‘existing’ Mac customers. And publicly bitched about the cost of the license.
Again, great ‘partners’.