Surface RT an “Unmitigated Disaster,” Says Class Action Suit

Published on August 13, 2013
by John Paczkowski

python380What a nightmare the Surface RT is proving to be for Microsoft. Piddling demand for the tablet forced the company to take an ugly $900 million charge for inventory adjustments in its fiscal fourth quarter. And now a class action lawsuit has been brought against it, alleging it hid poor Surface RT sales from investors.

Filed by Robbins, Geller, Rudman, & Dowd in Massachusetts district court, the complaint accuses Microsoft of materially misrepresenting the true financial effect that Surface RT has had on its business by failing to alert shareholders to the excess Surface inventory it had amassed by the end of its March quarter. That failure, it argues, is a violation of not just the generally accepted accounting principles by which Microsoft abides, but of SEC rules and regulations as well.

“What Defendants knew, but failed to disclose to investors, however, was 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,” the suit reads. “Defendants’ materially false and misleading conduct enabled Microsoft to forestall Surface RT’s day of reckoning and delay what would be tantamount to an admission by the Company that its all-important entry into the tablet market had been a failure.”

Nasty allegations and a brutal condemnation of Microsoft’s tablet strategy, which Robbins Geller says has “eviscerated” about $34 billion of Microsoft’s market value. The suit seeks to recover damages on behalf of all purchasers of Microsoft common stock between April 18, 2013, and July 18.

Microsoft declined comment on the complaint.

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