Microsoft expects to take an earnings charge of over US$1 billion for the quarter that ended in June related to expenses it will incur fixing faulty Xbox 360 machines.
On Thursday, Microsoft said it will expand its warranty coverage to Xbox 360 customers who have a certain type of hardware failure. The new programme is a result of an "unacceptable number of repairs to Xbox 360 consoles," Microsoft said.
Customers who have a general hardware failure that is indicated by three flashing red lights on their consoles will now be covered by a three-year warranty starting on the date of purchase. Microsoft will repair or replace the console, including cost of shipping, within that time frame. The company will also reimburse customers who have already paid for the repairs.
After investigating this high number of hardware failures, Microsoft identified factors that cause the problems and has made changes to prevent them, the company said.
Microsoft expects to take a $1.05 billion to $1.15 billion pre-tax charge for its quarter ending June 30 because of expenses related to fixing the consoles.