Xbox 360 exec Robbie Bach's personal red ring of death: insider sales?
By Thomas Ricker 
posted July 12th 2007 8:26AM
posted July 12th 2007 8:26AM
Robbie Bach, Microsoft's executive in charge of the Xbox game console, raised a few eyebrows recently when he sold millions in Microsoft stock just prior to going public with Xbox 360 woes. In a review of SEC filings, Robbie sold some $6.2 million worth of company stock between May 2 and Microsoft's July 5th announcement of charges exceeding $1 billion for Xbox 360 repairs. It is of course perfectly normal for high-ranking corporate execs to turn over company stock. However, this is typically done according to a schedule in order to deflect concerns over insider trading -- Bach's trades followed 8 months of zero sales. Microsoft's stock did not make a significant move after the announcement which, in legal hindsight, has led some insider watchdogs to give Robbie the benefit of the doubt. We'll see if the SEC is so forgiving.
I'm sure he'll be held to the high standards we've set for our execs in this day and age and everything will be handled justly and fairly.
-while he profits from it.
Oh man I bummed myself out with my own snark. :(
Insider Trading is what allows "SOME PEOPLE" to stay wealthier than other Americans.
What really kills me is the obvious IT...such as Congress being allowed to buy stock in drug companies which THEY THEMSELVES approve/dissaprove the commercial sale of.
They already know what companies are going to flourish cause they set the guidelines.
America is never going to get on the right track so long as these greedy scumbags inheret the political power.
Maybe his Xbox 360 had a RRoD so he decided to dump it?
Well he didn't know what would happen to Microsoft's stock after the announcement, and he didn't want to take a risk. What's so bad about selling?
Hence the words "insider trading"
My crystal ball shows a great future for you as a politician.
according to the ethics and regulation of SEC/CFA (certified financial analyst), any non-public material information that could cause movement in the stock value, should not be act on, or causing other to act on them.
Material information = info that will move the stock value/market.
In this case, Bach is clearly violating that.
Even though he can argue the '1 billion repair cost' is not a 'material information', as it is unclear what its effect on the stock value of M$. (but i think that argument itself is pretty weak, as it will reflects the increasing fixed production cost in each console thus hurting the profitability of this project)
yea, I think he is guilty as charged, and he is stupid for not following the routine to cashout.
That's insider trading-- illegal.
Dumb-d-dumb-dumb.
Maybe it will gain more attention if he actually profited from it...or rather, due to the sale, he saved himself from a disastrous loss. Then it will be a big news.
The real question is how the hell does J Allard still have a job?
M$ has always been about making as much money by delivering the least amount of product. PERIOD. This greed infects everyone in their management and every decision they make. It's why they charge for Live, It's why they nickel and dime their customers with expensive accessories, It's why they used the cheapest materials possible in their hardware. It's why they offered the three year warranty to current XBox Owners. They say it's a billion dollars but they hope they will have to spend a lot less to make the problem go away. Why? Because the alternative was to lose even more money and that's what MS is all about. I won't be surprised to hear more ales like this from other employees. Next we'll find out that he invested in the companies that are fixing the Xbox 360. I've heard that's a booming business.
"Making the most money by delivering the least product"
That sounds like a pretty good business model to me.
"Making as much money by delivering the least amount of product"
That sounds like a pretty good business model to me.
"M$ has always been about making as much money by delivering the least amount of product. PERIOD"
Newsflash, all for-profit companies operate that way.
I'd really like to know where people got the notion that spelling Microsoft with a dollar sign lends credibility to their opinions.
That sounds like APPLE/MACINTOSH to me.
That's why they are so succesful.
WOW, that may be the most blatant example of insider trading I have ever seen. The stock didn't drop so he didn't really gain anything (save a cool 6.2 mil) but a spade is a spade.
My question is why do execs of a gaming division that has never turned a profit have 6.2 mil in stock...and where do I find a job like this?
Maybe he's selling because he'll be hitting the road soon. Maybe the board isn't too happy about all those crap Xbox 360s out there and someone has to take the fall.
Just something to think about.
Yeah, but even if your fired, the stock is still yours. After your fired, you can still sell it (though it may change classes, but that's only for voting power/dividends anyway)
Bear in mind that Xbox doesn't make too much difference to Microsoft's bottom line; they're just one small division among many. Microsoft's stock is almost constant over time, so there wouldn't be too much reason to believe it would fall when posting a potential loss of 1 Billion. Especially since, I mean come on, it's Microsoft; they make countless billions a year.
That's the big corporate world to you my dear friends.
All companies are guilty of it. I'm not defending MS by any measures. But, just like politicians, all corporations are alike. They may start with the "Do No Evil", and "I'm representing the poor and working class" slogan. But, as soon as they smell the ink on those stacks of Benjamins, they all turn into the same beast.
Insider Trading is nothing new. And by the way, you know how the whole thing goes away? When the media decides that it's time to give it a break, until they find the next "big name" company to target. I certainly haven't heard anything else about the big scandal at Apple and Pixar dealing with this very issue. I wonder why?
A two month insider trading spree after 8 months of no share selling? Need more info here, which isn't provided by the linked story. Looks like most of the execs are on a scheduled selling plan, but his is sporadic. I'd be interested in hearing about the frequency of sells proir to last year (when x box was released)
Usually you just hear about insider trading happening in the days before bad news is released, a la Martha Stewart.
Nice note at the end of that article, if it's true.
"Microsoft already has developed a technology fix for the red-light failure, which is being implemented in some inventory and in Xbox consoles now in production"
"Usually you just hear about insider trading happening in the days before bad news is released, a la Martha Stewart."
So Microsoft is finally cutting their losses and deciding not to get back into console gaming next gen? I mean Peter Moore was boring as hell in his presentation and he seems a little glum to me. Maybe Peter and Robbie know something we don't.
Most of these transactions took place in early may nearly two months before the announcement. All of his filings were legal and proper notice was given, so please tell me again what the fuss is about?
Also, why do engadget readers seem to think that companies make all of these products out of the goodness of their hearts? Companies are in business to make money.
They should also hold (or be held) to ethical standards.
http://www.sec.gov/answers/insider.htm
So, some issues based on this very post:
"Bach's trades followed 8 months of zero sales"
Actually, the XBox 360 is the third best selling console out there. It's beating the pants off the PS3. Definitely not the runaway success of the Wii, but nothing is. But it's definitely not been 8 months of "zero sales" - selling around 200,000 units a month world-wide, which is in the same range as everyone else (the PS3 is at the bottom of the range of sales rates), even the PS2 sales.
It is true that sales have been declining - but the sales of all consoles, except for the Wii, have been declining since Christmas. That's normal.
Bach seems to have sold shares over two months. It's entirely possible he was thinking 'wow - we have a problem and there's a good chance we're going to have to eat this expense - I'd better dump my shares now'... but for it to be insider trading, he'd have to actually KNOW they were going to eat the cost.
The ongoing 'red ring of death' is well known and widely reported, so any investor who's bothered to do ANY research would already have adjusted their portfolio to cover most of this information.
So, it comes down to one issue: if Bach sold his shares *just* before announcing the news that they were going to repair all defective XBox 360s, THEN there would be good grounds for a charge of 'insider trading'.
To quote the SEC: "Illegal insider trading refers generally to buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, nonpublic information about the security." Low sales figure don't qualify. The repair program would - but only if there's evidence that Bach sold shares in immediate advance of the news that this program would be started and that it would cost $1B.
Oh.. and the fact that the shares didn't actually budge on this news (which is kind of surprising - but if true, it shows how strong investor confidence in Microsoft is) isn't relevent. It's not about what you made; it's about what you did.
"Bach's trades followed 8 months of zero sales"
They meant that he had not sold any of his shares for 8 months.
You really are a fat idiot, aren't you. The zero sales comment referred to Bach's sales of MS stock, not sales of 360s. FAIL.
M$ is a short form form the Ars Technica site. Sorry if it offends a few people.
talk about your non-stories: the stock price dropped less than a percent.
MSFT took a bigger hit when Google announced they were going to buy Postini.
There's a little magic number for many Microsoft employees related to stock and its $30/share. Why do you think in the past year that every time it's hit thirty you seem it go down so quickly? It's because tons of employees are trying to get a little money for their hard work. In this particular case it might be overkill, but it's not criminal. Everybody loves to hate Microsoft.
Ive have had my xbox 360 for 7 months...
(and gues what -red ring of death)
I hardly play the damn thing.
I phone microsoft.... (40 minute wait before i get through to an operator)
25 working days to be repaired plus a few more days shipping etc... (in the UK)
thats about 2 MONTHS!!! without my xbox that means it will be in repair for 25% of the time ive owned it.
i shouldve waited for the PS3
this product is cheaply produced, unreliable and should not of even been on the shelves.
What is wrong with microsoft! time and time again.