Lawsuit Claims Microsoft Misled Investors, Calls Surface RT 'Unmitigated Disaster'


After reporting a $900 million charge due to its Surface RT tablet flop, Microsoft is facing a class-action lawsuit for allegedly misleading investors about its Surface RT's sales.

The class-action complaint was filed Monday by Robbins Geller Rudman and Dowd LLP on behalf of purchasers of Microsoft Corporation between the dates of April 18, 2013 and July 18, 2013. The law firm claims Microsoft executives knew RT was tanking and intentionally kept numbers from investors.

According to the document, 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."
Defendants listed in the complaint are Microsoft, 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.

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According to the complaint, individual executives listed as defendants had in their possession information that "had not been disclosed to, and [was] being concealed from, the investing public."

The lawsuit specifies Surface RT's lack of sales can be largely tied to the limitations of Windows RT and its ARM-based architecture. Price slashing began a few months after the release of the Surface RT tablet, beginning with packaging the Surface RT tablet with a free keyboard valued at $100. Microsoft in June dropped the Surface RT's price by 30 percent.

Other vendors including Samsung, Lenovo and ASUS all either halted plans to bring their own tablets running on Windows RT to the U.S. or cut RT products from their lineup completely, signaling less adoption of the operating system throughout the industry.

Though Microsoft revealed to investors at the end of its fourth fiscal quarter, ended June 30, it would take a $900 million write-down on the Surface RT, according to the filed complaint, "the value of such inventory was materially impaired by March 31, 2013."

Microsoft told CRN it is not commenting on the matter at this time.

PUBLISHED AUG. 13, 2013