• Financial Times, Friday, July 6, 2007 11:30 AM

Microsoft is extending the warranties on more than 11.6 million Xbox 360 videogame consoles that have a technical flaw. Under the new warranty, Microsoft says it will pay repair and shipping costs for any machine that suffers a "three flashing red lights" problem for up to three years after purchase.

Refusing to reveal how many customers have experienced the technical problem, Robbie Bach, president of Microsoft's entertainment and devices division, characterizes the new warranty program as a pre-emptive attempt to deal with the issue and prevent any wider damage to the box's reputation. The company will take a charge against profits of more than $1 billion.

Microsoft rushed out Xbox 360 late in 2005 to beat new games consoles by Sony and Nintendo to market. Bach denies that the problems mean Microsoft launched the console before it was ready, or that they resulted from its relative weakness in hardware design.

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