Taken from this linkA storage device (such as a memory unit or hard drive) was not found during the software update. Follow these steps:
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I don't have a storage device, no hard drive
Then that would be why you are receiving the error. If you have a slim 4gb model, perhaps there's not enough room on the flash drive.
Then what should I do. I just bought it
You could buy either a USB flash drive, or an Xbox 360 Hard Drive. Checkout the Xbox 360 storage article which talks about the different storage options available for your Xbox 360. Cheers!
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