Microsoft falls short of fiscal year expectations for Xbox 360

Redmond (WA) - During a conference call to discuss the new warranty initiative, Microsoft said it fell short of its fiscal year goal of 12 million Xbox 360s by the end of June.

Today, Microsoft announced that it is extending the warranty on all Xbox 360 units from one year to three years. Just eight months ago, the console’s warranty was pushed up from 90 days to one year.

In its conference call, Microsoft said this decision was "completely voluntary" and motivated by a devotion to customer service. It may also be a move to try to increase hardware sales, as the company fell behind its expectations.

Microsoft, which has a fiscal year period ending on June 30, predicted total sales of the Xbox 360 to be 12 million by the end of last month. Today it was announced that the actual number is around 11.6 million.

That’s not a huge loss by any means, but it does underscore the unexpected boom in sales of Nintendo’s Wii console over the past eight months, which have chipped away at the Xbox’s next-gen market share.

Microsoft says the new warranty will have no impact on its fiscal year 2008 projections, even though it estimates the cost of the initiative to be as much as $1.15 billion.

President of the Xbox division Robbie Bach also took the opportunity to describe Microsoft’s E3 lineup as "one of the best if not the best in history." While there’s obvious marketing speak at play here, that’s a cockier statement than the company has made in the past. E3 kicks off next week, with Microsoft’s press briefing officially starting the event on the evening of July 10.