Citing excessive 360 repair costs, Microsoft revamps warranty program

And also takes a $1 billion hit in the process (courtesy CNN):

Microsoft said on Thursday "an unacceptable number of repairs" to its Xbox 360 will force it to take a charge of more than $1 billion for its most recent quarter, and it announced a new, extended warranty for the videogame console.

The announcements come amid mounting complaints about Xbox 360 failures on the Internet. Microsoft said it had investigated the sources of hardware failures indicated by three red flashing lights on the console and had identified "a number of factors" that can cause such failures.

Microsoft said it would extend warranty coverage to three years to cover the problem and would reimburse customers who had previously paid for repairs related to the three-flashing-lights error message.