I know there is another thread about the 3 year warranty, but I think the 1 billion charge is deserving of it's own discussion. One billion dollars DUDE!!!
Man, this has to be a serious, serious blow.
http://news.yahoo.com/s/nm/20070705/...2C1t4FZ5ME1vAI
"Microsoft Corp. (Nasdaq:MSFT - news) said on Thursday said 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.
The charge will be in a range of $1.05 billion to $1.15 billion, before taxes, for the quarter ended June 30, Microsoft said.
Microsoft had already cut its forecast for Xbox 360 shipments in January. It had previously forecast shipments of 13 million to 15 million by the end of June.
"What you have to ask yourself as an investor is, should Microsoft be in the hardware business?" said Kim Caughey, senior analyst at Fort Pitt Capital Group, which oversees about $1.2 billion, including Microsoft shares, for clients.
She added, however, that the charge should not be a concern for long-term investors.
"It's a lot of money, let's not say it isn't," Caughey said. "But if you're a long-term holder, I don't think it's going to have that great an impact."
Bach said the new warranty would not impact the Xbox division's plan to turn a profit in fiscal 2008, which started this month.
He was also mum on the issue of whether Microsoft would announce a price cut for the Xbox 360 console if Sony made a similar move.
"We will assess what we do with pricing and other aspects of our business based on our own business," he said.
Microsoft shares dropped slightly to $29.91 after closing at $29.99 on Nasdaq."
Wowsers. Taking a 1.15 billion charge is freaking ridiculous. I knew that they were fixing a god awful number of Xbox 360's and that somebody has to be paying for this shit. It's not like they can fix them for free, and ship them for free and all that. So they are going to have to take a freaking 1.15 billion charge!!!! That is fucking amazing. One Xbox 360 premium costs about $431 when you factor in tax ($399 + tax). So if you take 1.15 billion, and divide it by $431, you get nearly 2.7 million Xbox 360s. In other words, Microsoft could have given away the first 2.7 million Xbox 360's for free, and they would have lost the same amount of money as taking a 1.15 billion charge. That is absolutely astonishing to me. I'm not so sure Microsoft doesn't pull the plug on the whole 360 thing altogether. You look at the 360 and the Zune, and I think it's becoming quite obivious that Microsoft doesn't know what it's doing in the hardware space. It's a software company, trying to morph into a hardware company, and it's having a real tough go at it. I enjoyed the Xbox 1 immensly, and I enjoy the 360 as well. I had one 360 die on me so far, it was a launch day console. It almost survived a full year, then it died. I bought it at Costco, so I got another one for free without having to send it anywhere, so it didn't bother me any. I didn't have my 360 for only 1 day. But for others that have had to ship it out and wait a month or more to get it back, I can understand how that might frustrate. On top of that, some people had to pay to send it out, then later got reimbursed or whatever.
But goddamn!!! 1 FREAKING BILLION DOLLARS!!! How is the entertainment division of Microsoft going to ever be profitable?? Just when it was starting to look like things were looking up for the Xbox 360. And what does this do to a possible price drop? Can they really afford to do a price drop now? Sony is going to drop their price $100, and I thought it was an absolute given that MS was going to do a pre-emptive strike and announce a $100 price drop the night before Sony's keynote. But now, with this 1 billion charge, I just don't see how they can get away with it. I think they absolutely need to do it to have a legitimate chance at taking the No.1 market share position in North America from a long term standpoint, but goddamn.....MS can only take so much bleeding. At some point they are going to raise the white flag and say fuck it. I can tell you right now that we aren't going to see any portable gaming system from MS. They tried the Xbox 1 and failed. Tried the 360 and have done relatively mediocre, but if you look at this chargeback and their dwindling NPD numbers, it's starting to point towards failure (at least from a fiscal sense), and the Zune has been a complete dissaster. When do you just cut your losses and take your ball and go home?