A lawsuit filed in federal court in Massachusetts this week alleges that Microsoft executives didn’t properly fess up to the lackluster sales and growing stockpiles of the company’s Surface RT tablet prior to cutting the price and announcing a surprise $900 million charge against earnings last month.
The suit, a proposed class action filed on behalf of shareholder Gail Fialkov, names Microsoft and executives including CEO Steve Ballmer and former finance chief Peter Klein as defendants.
Microsoft declined to comment on the suit.
The complaint cites a series of public statements in recent months in which executives discussed Surface RT in general but didn’t go far enough or acknowledge the inventory problems.
Microsoft announced the $900 million Surface RT write-down for the quarter ended June 30, but the suit alleges that the company had an obligation to disclose the situation and take the writedown sooner, by the end of its March 31 quarter.
However, Microsoft didn’t publicly reduce the price of the Surface RT — a key factor in the writedown — until July 15.
The complaint says, “While the investment community speculated that Microsoft was sitting on a half million unsold Surface RT devices, in reality, the Company was saddled with millions of Surface RT units that, at its then current $500 price point, were generally unsalable. As a result, Defendants knew or recklessly ignored, that the market value of Microsoft’s Surface RT inventory had declined precipitously and that the Company, pursuant to applicable accounting rules, was required to write-down the value of its Surface RT inventory during the quarter ended March 31, 2013.
The complaint cites the 11 percent decline in Microsoft share following the company’s latest quarterly report, noting that it “eviscerated about $34 billion of the Company’s market value.”
PC World and the Seattle Times reported on the suit earlier today. Here’s the full text of the complaint …
