On the eve of the big (though decidedly more intimate) Electronic Entertainment Expo (E3) next week in Los Angeles, Microsoft drops a bombshell: all those bloggers complaining about the hardware crashes on Xbox 360 were heard in Redmond, Washington. Microsoft will set aside between $1.05 and $1.15 billion dollars to cover a new, 3-year extended warranty program to cover repairs for the device.
But after a conference call yesterday, we now know the Xbox problems go far deeper. Microsoft also confirms that it will miss sales targets again on the Xbox: 11.6 million units sold on the quarter instead of the 12 million that were expected. And that 12 million comes after the company's earlier, original forecast of 13 to 15 million.
It gets worse: Microsoft also says the entertainment/device division lost another $315 million.
But in his only broadcast interview about all this, the president of the division Robbie Bach reaffirmed to me that his division will be profitable, as scheduled, by next year. "Absolutely," he tells me. He acknowledges the severity of the technology glitch, but won't say how many units have needed repair.