In another setback for Microsoft Corp.'s unprofitable entertainment and devices division, the company says it is planning to spend at least $1 billion to repair serious problems with its Xbox 360 video game console.
Microsoft declined to detail the problems that have caused an onslaught of "general hardware failures" in recent months but said Thursday it will extend the warranty on the consoles to three years.
The glitches, and the bad publicity, could weigh the company down as it claws for market share in the highly competitive console market. In May, the Xbox 360 ranked No. 2 in unit sales behind Nintendo's Wii, but still beat out Sony's Playstation 3, according to data from NPD Group.
"We don't think we've been getting the job done," said Robbie Bach, president of Microsoft's entertainment and devices division, which also makes the Zune digital music player, a distant competitor to Apple Inc.'s powerhouse iPod. "In the past few months, we have been having to make Xbox 360 console repairs at a rate too high for our liking."
Bach said the company made some manufacturing and production changes that he expects will reduce Xbox 360 hardware lockups, but he declined to identify the problems or say which others might remain. Microsoft said it will record a charge of up to $1.15 billion for its fourth fiscal quarter, which ended June 30, to cover the additional costs associated with the warranty extension.
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