MS in post-holiday X360 shortages, 16% failure rate

Microsoft is running low on units of its Xbox 360 games systems in the wake of the holidays, the company revealed late Wednesday. Although sales of game systems most often cool after gifts for Christmas and other events satisfy demand, Microsoft's global game marketing chief Jeff Bell explained that the company had "misjudged demand" and that it has been unable to supply enough systems through at least the whole month of January with February's final results likely to reflect the same pattern. The shortfall is the result of unusually high demand and has triggered frustration among retailers as well as warnings that sales numbers may not reach their potential as a result.

"We're literally out of stock in many stores," Bell said. "Retailers have been really upset, they are on allocation [for the number of units promised each month]."

Microsoft saw record sales of 1.3 million Xbox 360 systems during the last three months of 2007, spurred in part by the launch of Halo 3 as well as a general upswing in console sales. However, the console has rarely seen shortages beyond its holiday 2005 launch and has rarely seen demand as high as for the Nintendo Wii, which has rarely been in great supply.

Separately, research firm SquareTrade has discovered through a sample-based study that the Microsoft console suffers an unusually high 16.4 percent failure rate. The percentage is more than five times the roughly 3 percent failure rates for the PlayStation 3 and Wii. About 60 percent of Xbox failures, or 9.8 percent of the entire Xbox system base, is affected by the overheating "red ring of death" issue that forced Microsoft last year to create a special three-year warranty just for these failures, according to the study. The unusual rate is believed to originate from the lack of adequate video chipset cooling in most versions and is expected to go down as systems released in fall 2007 and onwards bring smaller, cooler processors into the design.

Filed under: gaming, gadgets
Other story tags: Microsoft, Xbox 360, PS3, Wii