Xbox's Billion Dollar Problem - A Conspiracy? ~ Gamers World Bangladesh Blog

Tuesday, July 17, 2007

Xbox's Billion Dollar Problem - A Conspiracy?

Microsoft has been taking some serious flak for the high failure rates of their consoles. At least 2.5 million Xbox 360s sold worldwide have been reported to be defective and it is going to cost the company about $1.1 billion to fix this mess. If you don't know the whole story, then I suggest reading my previous article Xbox's Billion Dollar Problem first.

But it seems that there might be other reasons behind this announcement. An article posted in Computer World said that Robbie Bach, the Microsoft executive in charge of the video game console sold $6.15 million worth of company stock or about 20% of his holdings prior to the announcement. While that alone might not raise any flags but the article goes on to say that "Bach was one [of the] Microsoft executives who spelled out the problems with Xbox 360." "The game machine's design, Bach said, was defective".

Now this is spreading like wildfire around the internet and in forums. I came across one statement online that "it was all a setup" and another "he [Bach] wanted to make a quick buck".

While this may sound absurd, but some think that there might be truth in it. The fact that Microsoft had been aware of the problems for several months and that Bach was one of the first to spill the beans, adds further suspicion to this matter. Bach sold his shares in May at an average price of $30.73 while the price fell down to $22.07 when the announcement had been made on July 5th.

Could this have been an insider activity? A lot of people in message boards are speculating so. But I doubt it. It just might be that Bach sold his shares at the wrong time and "that the timing may not have been up to [him]".

Indeed, Friday night, Microsoft spokesman Eric Hollveiser issued a statement about Bach's transactions. "Robbie Bach's past trading is completely unrelated to last week's announcement [of]extending our Xbox 360 warranty [and that] Microsoft executives sell shares for a variety of reasons, the most common being portfolio diversification".

Not only Bach but several others, including Microsoft Chairman Bill gates, General Counsel Brad Smith and the head of the Windows division, Kevin Johnson had sold shares that May.

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