Some Microsoft investors are angry about the rosy picture the company has painted about Surface RT sales even as they were tanking, a lawsuit has claimed.
Microsoft lied about the success of its Surface RT tablet kept its stock price artificially high, which caused real economic harm to investors who bought stock between the end of April 18 and July 18 when the company announced it was taking a $900 million hit for Surface RT inventory, the lawsuit said.
Disclosure of the $900 million charge resulted in an immediate $4.04 drop in price per share – which translates into $34 billion in company value coming out of investors’ holdings.
The lawsuit filed US District Court for Massachusetts named Microsoft and top executives as being to blame for inflating the stock price. It was filed by Gail Fialkov, but part of the suit seeks to include other plaintiffs numbering in the hundreds or thousands to form a class action.
The suit names Microsoft, but also individually CEO Steve Ballmer, then-CFO Peter Klein (no longer with the company), chief accounting officer Frank Brod, and CMO Tami Reller.
"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," read the filing. "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."
"…Defendants acted with [intent or knowledge of wrongdoing] in that Defendants knew, or recklessly disregarded, that the public documents and statements they issued and disseminated to the investing public in the name of the company or in their own name during the Class Period were materially false and misleading."
"Defendants, by virtue of their receipt of information reflecting the true facts regarding Microsoft, their control over, and/or receipt and/or modification of Microsoft’s allegedly
materially misleading misstatements, were active and culpable participants in the fraudulent scheme alleged herein."
"…Defendants engaged in a scheme to deceive the market and a course of conduct that artificially inflated the price of Microsoft common stock and operated as a fraud or deceit…"
The news gets even worse for the Surface as investment bank Goldman Sachs estimated the tablet would shift only 1.6 million Surface Pro and Surface RT machines by 2014, far below the original forecast of 3.5 million. Only 1.9 million tablets were sold from October 2012 to June 2013.
Microsoft hasn’t responded yet to the complainthas it given up on the embattle Surface RT. An announcement on a new version of the lightweight tablet is expected in to coincide with the release of Windows 8.1.
IDG News Service
Ltd
