Microsoft in Class-Action Lawsuit Over Misleading Investors About Surface RT

14 Aug 2013

Microsoft recently reported a $900 million charge as a result of Surface RT tablet's failed sales, and is now dealing with a class-action lawsuit; some investors allege that the company misled them about its Surface RT sales.

Purchasers of Microsoft Corporation filed a class-action complaint via Robbins Geller Rudman and Dowd LLP, who claim that Microsoft executives knew RT was not doing well, and purposefully failed to show numbers to investors.

The document states that Microsoft's "foray into the tablet market was an unmitigated disaster, which left it with a large accumulation of excess, over-valued Surface RT inventory." Microsoft's CEO Steven Ballmer, Microsoft's former CFO Peter Klein, Microsoft's Corporate Vice President and Chief Accounting Officer Frank Brod, and Executive Vice President of Microsoft Marketing Tami Reller are listed as defendants in the complaint.

The complaint also notes that individual executives (listed as defendants) had information which "had not been disclosed to, and [was] being concealed from, the investing public."

According to the lawsuit, the limitations of Windows RT and its ARM-based architecture can be linked with Surface RT's lack of sales. Price cuts for the Surface RT tablet - starting with packaging the Surface RT tablet with a free keyboard valued at $100 - began a few months after the product was initially released. In June of this year, Microsoft lowered the price of Surface RT by 30 percent.

Reduced adoption of the OS throughout the industry was signalled when Samsung, Lenovo and ASUS, among other vendors, stopped their plans to bring their own tablets operating Windows RT to the U.S., or removed RT products from their lineup completely.

In its fiscal Q4, Microsoft announced it would take a $900 million write-down on the Surface RT, and one filed complaint said: "the value of such inventory was materially impaired by March 31, 2013." (CY) Link