It is never a good sign when a division head sells some of his company stock right before a major product recall or piece of bad PR is brought into the public light. That's precisely what happened to Robbie Bach, President of Microsoft's (NASDAQ: MSFT) entertainment division, when he sold 20% of his MSFT holdings about a month before the world's largest software company announced it had seen an "unacceptable number of repairs" to the Xbox 360 game console.

Is timing everything? Possible, but this is just another "seemingly coincidental" stock sale right before some bad news -- or is it? Bach's sale netted $6.15 million for the executive, as he sold shares in four blocks between May 3 and May 30. Then, on July 5, Bach was on hand with financial analysts to explain that the Xbox 360's design "was defective" and the number of repairs to the console had been "unacceptable" to the company. Microsoft then proceeded to pledge $1 billion to extend warranties on the console shows.

Bach stated on July 5 that Microsoft had been aware of the Xbox 360's design problems for months, although all the variables that came to light were not seen in the first year of the Xbox 360's public consumption. At issue are Bach's sales in May that were not part of the regular plan to divest his holdings of MSFT shares executives usually file. More to probably come here, as the timing of Bach's sales in May and a billion-dollar admission by the company seem too close for comfort.

[Disclosure: I own MSFT shares as of 7-16-2007]