Microsoft spending $1.5b on dodgy Xboxes

Microsoft has admitted to a major reliability problem with the Xbox 360 console and has pledged up to $1.5bn (£750m) to sort it out.

The company has promised to extend its warranty to three years to cover a large number of what it terms ‘general hardware failures’. A growing number of Xbox users have experienced the ‘three flashing red lights’ situation but this is the first time that Microsoft has acknowledged that there is a problem.

In an open letter to Xbox users, Peter Moore, corporate vice president of the Interactive Entertainment Business, apologised for the fiasco.

“You've spoken, and we’ve heard you,” he said. “Good service and a good customer experience are areas of the business that we care deeply about. And frankly, we've not been doing a good enough job. Some of you have expressed frustration with the customer experiences you have had with Xbox 360; frustration with having to return your console for service after receiving the general hardware error message on the console. If we have let any of you down in the experience you have had with your Xbox 360, we sincerely apologise.”

He explained: “As of today, all Xbox 360 consoles are covered by an enhanced warranty program to address specifically the general hardware failures indicated by the three flashing red lights on the console. This applies to new and previously-sold consoles.”

Anyone that has spent money to have the flashing light problem fixed will also be reimbursed.

This is blow to Microsoft, which has managed to increase Xbox 360 sales in recent times despite the arrival of Sony’s PS3.