A New Way to Burn Rubber

"Xbox 360 Wireless Racing Wheel makes the racing feel real," reads the product description on Amazon.com (Nasdaq: AMZN). Unfortunately for some diehard gamers, the $120 accessory shares a few other characteristics with real cars: It's prone to overheating and emitting smoke.

After fielding dozens of complaints, Xbox parent Microsoft (Nasdaq: MSFT) is back in defensive mode over buggy Xbox hardware. The racing wheel has overheated in rare instances when the accessory is plugged into an electrical outlet, though it's never reported a flameout when running on batteries.

It may not seem like much of a problem. Microsoft has sold just 230,000 of the pricey steering-wheel controllers. However, it comes just weeks after Microsoft took a roughly $1 billion charge to extend the warranty on the console itself, after too many gamers had to repair their defective 360s. I was one of them, and I'm still waiting for the repair refund, nearly a year later.

So even if this isn't a major failure, it's troublesome to Microsoft for a couple of reasons. First, when you're talking about people who are willing to pay twice as much as a driving game itself for a steering wheel add-on, you're dealing with fanatical gamers. You don't want to anger them. Second, this black eye comes as Sony (NYSE: SNE) and Microsoft are slashing console prices, while Nintendo's (OTCBB: NTDOY.PK) Wii remains the top-selling next generation console at its original (and profitable) $249 price point.

In a Nintendo press release yesterday, the company cites internal sales figures and NPD Group data to point out that the Wii is this month's best-selling system, despite the Xbox 360 and PS3 price cuts. The company also points out that it's moving systems at its highest weekly sales pace since last year's busy holiday season.

So how bad must this feel if you're Microsoft? The leader is racing along the track at top speed, while you're stuck in another pit stop.

"Drive with confidence and zero loss of performance," reads another line in the product's description on Amazon. Riiiiiight. Whatever happened to truth in advertising?

Microsoft is an active stock pick for Inside Value newsletter subscribers. Yes, Mr. Softy is now a value stock! Nintendo and Amazon.com are Motley Fool Stock Advisor recommendations. Take either newsletter for a free 30-day test drive before you decide whether to keep it or hand over the keys.  

Longtime Fool contributor Rick Munarriz is a fan of all three consoles, but he finds himself spending way too much time with the family on the Wii at the moment. He does not own shares in any of the companies mentioned in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool's disclosure policy keeps a fire extinguisher handy.