5 Companies That Had A Rough Week12:00 PM EST Fri. Aug. 16, 2013
Fallout from Microsoft's floundering efforts to enter the tablet PC market continued this week when the company was hit with an investor lawsuit over Surface RT sales. Also making our list of companies that had a rough week were layoffs at Cisco, a major software vendor's need to issue a fix for a botched software patch, and activist investor Carl Icahn's latest target.
Microsoft was hit with a class-action lawsuit this week by investors who claimed the company misled them about moribund sales of its Surface RT tablet.
Last month Microsoft took a $900 million charge against earnings to write down its inventory of unsold Surface RT tablets. In a 10-K filing with the U.S. Securities and Exchange Commission, the company disclosed that Surface tablet sales (including both the Surface RT and Surface Pro tablets) were $853 million in fiscal 2013.
The lawsuit calls Microsoft's efforts in the tablet PC market "an unmitigated disaster" and claimed Microsoft executives knew the Surface RT was a failure but intentionally kept sales numbers from investors. The complaint was filed Monday by Robbins Geller Rudman and Dowd LLP on behalf of purchasers of Microsoft shares between the dates of April 18, 2013, and July 18, 2013.
Nothing ruins a CEO's day more than to have the administrative assistant say: "Carl Icahn on line one."
Activist investor Icahn disclosed in a tweet Tuesday that he has acquired a $1.5 billion stake in Apple and he considers the company "to be extremely undervalued." He also disclosed that he had spoken to Apple CEO Tim Cook that day.
Icahn, of course, is currently skirmishing with Dell CEO Michael Dell, opposing the executive's efforts to take Dell private. Icahn also has acquired stakes in speech recognition technology company Nuance and in Netflix.
The networking giant surprised the industry Wednesday when it announced plans to shed 4,000 jobs, about 5 percent of its global workforce. Cisco's shares fell more than 9 percent in after-hours trading after the news hit.
The news came during Cisco's fourth-quarter earnings call with CEO John Chambers. He didn't provide details about which geographies or product groups would be affected by the cuts. The CEO portrayed the layoffs as a way to boost Cisco's "speed, flexibility and agility," rather than a response to slowdowns in any specific area.
Cisco's channel partners took the news in stride, saying they remained bullish on the company despite news of the layoffs. They forecast continued strong sales of the company's networking and unified communications products.
Microsoft had to pull a critical Exchange 2013 security patch less than 12 hours after releasing it as part of this week's Patch Tuesday update.
The original patch, MS13-061 security update, was designed to fix several vulnerabilities in Exchange 2013 that could open the door for remote code execution and leave the program vulnerable to hackers. But once the patch was out it was found to corrupt the Exchange index database, causing problems for Exchange users searching for email stored on corporate networks.
Microsoft posted a workaround for anyone who had installed the server patch and was experiencing problems.
Microsoft has released a number of patches this year that have not been fully baked, Wolfgang Kandek, CTO of security and compliance software provider Qualys, Redwood City, Calif., told CRN.
A software services tax that took effect July 31 has riled Massachusetts' solution provider community and has some rethinking plans to expand their business within the state. That's giving a black eye to Massachusetts politicians who like to brag about the state's high-tech industry.
The 6.25 percent services tax was part of a larger package of taxes and financing for the state's transportation system and was approved by the state's legislature and governor with little notice.
IT service and solution providers say the tax could apply to anything from building a website for a client to updating software on a customer's computer. There's a growing movement to repeal the tax. In the meantime, in the words of Michael Widmer, president of the Massachusetts Taxpayers Foundation: "Other states couldn't be asking for a greater opportunity."