Complaints Bring New Xboxes in Japan

Microsoft(MSFT Quote) is repairing or replacing Xboxes sold in Japan after receiving complaints from consumers who said the game system's disc player scratched DVDs and CDs.

The world's largest software maker stressed that it is not recalling the Xbox in Japan, but will repair or replace consoles at no cost. The company plans to release a statement later today.

The move comes two weeks after Microsoft Chairman Bill Gates flew to Japan to begin selling the video game console and one week before Microsoft's March 14 launch of Xbox in Europe.

Microsoft initially shipped 250,000 consoles as part of its launch in Japan, which was pushed back two months from its initial schedule. Microsoft sold 1.5 million units in the U.S. in the six weeks after the product's launch Nov. 15.

Microsoft CFO John Connors has said the Redmond, Wash., company hopes to sell up to 6 million Xboxes worldwide by the end of the fiscal year. The company has committed $500 million in marketing to take on Sony's(SNE Quote) PlayStation 2 and Nintendo's GameCube in the fiercely competitive video game space.

Xbox sales will cut into the Microsoft margins in the near term because the company is initially expected to lose more than $100 on each console sold. Microsoft hopes to make that money back later by selling video games and parlaying the video game console along with Ultimate TV into popular living room entertainment devices.

Shares of Microsoft fell $1.47, or 2.3%, to $62.16 in recent trading.