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Here's a likely theory.
MS thought the Xbox arcade would do well.... and it didn't...
Anyways, i think it's pretty sad and embarrassing that Microsoft is having problems with supply issues during the 3rd year in the market. I fail to see why they even limited their production if they spent all that money on 360 advertisements and Halo3 marketing during the holidays, they should have been pumping 360s out of factories non stop at that point. Maybe MS has better quality control now and changed their manufacturing process for more stable 360s?