From IGN:
Sony has responded to internet reports claiming its newly-released 40GB PlayStation 3 is suffering from a 40 percent failure rate, the company categorically denying the claims.
In an official statement, David Reeves, president of Sony Computer Entertainment Europe noted, "We are very proud of the quality and reliability of PlayStation 3 and are disappointed that such extremely sloppy journalism has resulted in this totally inaccurate story". He continued, highlighting the console's "fantastic jump" in sales since the release of Sony's 40GB PS3, alongside the machine's "very low" failure rates.
News of PlayStation 3's blowing up like they'd all got together to have some kind of blowing up competition hit internets following a story on Dutch website Gamed.nl. The site claimed Belgian games retailer Games Mania had revealed that, despite selling well, Sony's 40GB PS3 was suffering a return rate of 40 percent, with customers experiencing disc-read issues.
Seems to me Microsoft denied they had a problem too. Time will ultimately tell.