Retailer EB Games has hosed down reports suggesting that a spate of hardware defects with Xbox 360 video game consoles were straining its relationship with Microsoft.

A chat transcript published on the popular gaming blog Kotaku purportedly showed a high-ranking EB Games employee saying the retailer had $10 million worth of defective Xbox 360 consoles for which Microsoft refused to reimburse it.

"There have been threats of EB dropping the Xbox range all together," the transcript read.

The report quickly spread throughout the blogosphere and gaming forums lit up with discussions on the issue, before EB Games finally set the record straight late this afternoon.

"It's 99 per cent bullshit really," EB Games chief executive Steve Wilson said in a phone interview.

Wilson said EB Games had to recall and replace its stock of Xbox 360 units in the middle of last year, but that was an isolated "hard drive batch problem" and all defective units had been returned to Microsoft.

Also in the middle of last year Microsoft said global hardware problems with the Xbox 360 could lead to $US1 billion in repairs and extended the warranty on the console to three years. The admission came after millions of customers worldwide were forced to mail their consoles back to Microsoft for repairs.

Microsoft would not reveal the cause of the "general hardware failure" issues but said Xbox 360 consoles shipping since the middle of last year should not be defective. Gamers have termed the issue "red ring of death" due to the red ring of lights that show on the face of malfunctioning units.

Wilson said EB Games had experienced high returns due to the red ring of death issue earlier in the Xbox 360's life, but the number of defective consoles had declined since Microsoft announced the extended warranty.

"Even when we had the batch problem six months ago, we were talking about a couple of thousand units," Wilson said. "$10 million is 25,000 units - that's a ridiculous number."

In an interview published on a Seattle Post-Intelligencer blog this month, an anonymous Microsoft employee who has "worked on the Xbox 360 project for many years" said about 30 per cent of all Xbox 360 consoles failed early in their life.

The same blog recently broke the news that Halo game developer Bungie would part ways with Microsoft, a full week before the official announcement was released.

"MS was so focused on beating Sony this cycle that the 360 was rushed to market when all indications were that it had serious flaws," the Microsoft employee purportedly said.

"The design qual[ity] testing was insufficient and incomplete when the product was released to production. The manufacturing test equipment had major gaps in test coverage and wasn't reliable or repeatable. Manufacturing processes at all levels of suppliers were immature and not in control."

One of the main causes of the red ring of death was overheating, the employee allegedly said, and the likelihood of this occurring increased when playing system-intensive games or if the console was placed in a hotter environment. This could explain widespread issues in Australia.

Three EB Games stores contacted today said they did not have any Xbox 360 Pro consoles in stock but did have the other Elite and Arcade versions. The lack of stock has been used by some blogs as confirmation of the alleged spat between Microsoft and EB Games, as the Pro model was said to be the most defective.

But Wilson said this was just a coincidence and the stock shortage was due to high sales over the holidays.

"If you go into our stores now you can't buy a Wii, you can't buy a DS, you can't buy a Pro 360, but you can buy an Elite or an Arcade 360," he said.

News-Source: http://www.smh.com.au"