Microsoft reports problems with Xbox

Microsoft Corp said on Wednesday it had received isolated reports of technical problems with its popular new Xbox 360 videogame system.

Some complained that their systems were crashing during game play, sometimes with error messages popping up.

On www.xbox-scene.com, a site dedicated to Xbox gaming, a member called jsgongwon reported that he could not finish the first lap of Project Gotham Racing 3.

"It's a few reports of consoles here and there not working properly," said Molly O'Donnell, a spokeswoman for Microsoft's Xbox division. "It's what you would expect with a consumer electronics instrument of this complexity .... par for the course."

Gaming lined up for hours on Monday to be among the first to purchase the next-generation system, which was in short supply despite its price tag of US$299.99. Microsoft hopes to sell 2.5 million to 3 million of the new systems in the first 90 days.

O'Donnell anyone with Xbox problems to call 1-800-4myXbox or go to www.xbox.com. If the problems can't be resolved immediately, Microsoft said it will pay to ship the console overnight to a repair center, overnight it back once it's fixed, or ship a replacement.

The Xbox will go on sale in Europe on Dec. 2 and in Japan on Dec. 10. Flextronics International Ltd, Wistron Corp (緯創) of Taiwan and Celestica Inc are building the machines.

But iSuppli Corp analysts said on Wednesday that Microsoft loses at least US$153 on each Xbox video-game console it sells, based on just the cost of components and assembly.

Parts as processors and manufacturing cost US$552.27 for every machine that retails at US$399, California-based iSuppli said in a statement. Marketing and shipping costs aren't included in the estimates.

"As we go through the cycle, the cost of the components goes down significantly," said Evan Wilson, an analyst at Pacific Crest Securities in Portland, Oregon, who doesn't rate Microsoft stock.

Royalty Microsoft receives from game publishers "will grow much more rapidly when the installed base of Xboxes increases," he said.

Microsoft Intel Corp as its processor supplier and, like Sony, is relying on New York-based IBM Corp, which makes 60 percent of the Xbox components, iSuppli said.

The premium version of the games machine uses an IBM processor that costs US$106, according to iSuppli. Other IBM chips bring the total cost of chips and integrated circuits to US$340 per console, the researcher said.

Microsoft's system, which sells for US$299, has components that cost about US$310, according to Portelligent Inc, an Texas-based market research company.

Microsoft relying on sales of higher-margin Xbox packages, accessories and games to make a profit, Portelligent said on Wednesday in a statement. The machine has also been designed to use parts from multiple vendors, something that will help allow quicker cost reduction, Portelligent said.