This story at Financial Times says that Microsoft will write off $1 billion on extending the warranty to three years due to hardware errors on the XBox 360.
The estimated pre-tax charge of between $1.05bn-$1.15bn would cover extended warranties for 11.6m machines that have already been sold, as well as nearly 2m more that have been made but not yet sold, the company said.
I thought this was an interesting note as well:
The charge will add to sizeable losses that Microsoft has suffered in its efforts to break into the video game business. Its digital entertainment division, which is based largely on the Xbox business, has registered losses of more than $4bn since the first version of the games console was launched.