Xbox chief resignation unrelated to console troubles

Editor’s Note: This story is reprinted from Network World.

Amid problems with Microsoft’s Xbox, including faulty systems that spawned a $1 billion promise two weeks ago to extend warranties, the head of the company’s interactive entertainment business resigned Wednesday.

Peter Moore, who spent four and a half years at Microsoft as the corporate vice president for the Interactive Entertainment Business (IEB), said his departure from Microsoft is unrelated to problems with Xbox, including the company’s admission to “general hardware failures” plaguing Xbox 360 consoles and Microsoft’s subsequent pledge to spend more than $1 billion to extend warranties.

“[Leaving] is something that has been in the works for a few weeks and is completely and utterly unrelated to anything that has gone on in the [Xbox] business in the past few weeks. It is purely about family … and a desire to get back to our Bay Area roots,” Moore said on a podcast posted on the blog of Larry Hryb, Xbox Live director of programming at Microsoft.

Moore said he is joining Electronic Arts (EA) as the president of EA Sports, which produces gaming titles like Madden NFL and NCAA College Football that run on Xbox and Xbox 360. Ironically, Don Mattrick, a former president at EA, will take over for Moore on July 30.

“Somebody called it a hostage exchange,” Moore joked. He said Mattrick has been in an advisory role to the Xbox team and the transition should be a smooth one.

“People will write what they write,” Moore said. “All I can say is that they need to understand this agreement between myself and EA was signed about five weeks ago, way before the final work was completed on the warranty [settlement]. It is completely unrelated.”

“The people I really care about know the truth and that is all you can ask for,” he said.

Moore said he was leaving Microsoft with “sadness in my heart.”

Microsoft’s Xbox has itself been in a sad state of affairs the past few weeks.

On July 5, Microsoft admitted that its Xbox 360 consoles were piling up “an unacceptable number of repairs.” The company pledged to find the source of what it termed “general hardware failures” and said that Xbox 360 customers who experience a failure will get a three-year warranty from their date of purchase.

Microsoft is taking a $1.05 billion to $1.15 billion pre-tax charge to its earnings to cover the expense. In addition, Microsoft will retroactively reimburse customer who have paid for their repairs.

“We value our community tremendously and look at this as an investment in our customer base. We look forward to great things to come,” said Robbie Bach, president of Microsoft’s Entertainment & Devices Division in a statement July 5.

Microsoft also faces a $5 million federal class-action lawsuit in Florida that claims an Xbox defect damages game disks and makes them unusable. The suit claims the consoles were “negligently designed and manufactured.”

Xbox also has been the focal point of financial struggles within Microsoft’s Home and Entertainment business. During Microsoft’s fiscal 2006, Home and Entertainment posted a 160 percent operating loss in the division mostly attributable to a $1.64 billion increase in cost of revenue associated with the number of Xbox 360 consoles sold and higher Xbox 360 unit costs. Microsoft said it was selling the Xbox at a “negative margin.”

In his nearly five years at Microsoft, Moore established alliances with industry giant Square Enix and legendary developers Hironobu Sakaguchi (Mistwalker), Yoshiki Okamoto (Game Republic) and Tetsuya Mizuguchi (Q Entertainment), and brought EA onto the Xbox platform. Before Microsoft, Moore was president and COO of SEGA of America.

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