Class-action suit filed against Microsoft over Surface RT

Class-action suit filed against Microsoft over Surface RT

Summary: A class-action suit over Microsoft's statements regarding Surface RT sales has been filed in Massachusetts.


The law firm Robbins Geller Rudman & Dowd has filed a class-action suit against Microsoft over what it claims was misleading information on the company's Surface RT sales. posted about the suit on August 13, noting that it names as defendants Microsoft CEO Steve Ballmer, former Chief Financial Officer Peter Klein, Corporate Vice President Frank Brod and Executive Vice President of Marketing Tami Reller.

Read this

Windows RT: DOA to almost everybody

Windows RT: DOA to almost everybody

Microsoft designed Windows RT to get its newest OS on tablets using the popular ARM processor. It did this well, but in the process crippled it, making it a no-go for the consumer.

The case was filed in United States District Court for the District of Massachusetts on behalf of purchasers of Microsoft stock between April 18, 2013 and July 18, 2013 (the “Class Period”). The firm is seeking a lead plaintiff for the case. A PDF copy of the complaint is here.

Robbins Geller Rudman & Dowd has been busy filing similar types of class-action suits, as a quick check on its Web site makes clear. (Or, as the August 12 press release more delicately puts it: "Robbins Geller ... has expertise in prosecuting investor class actions and extensive experience in actions involving financial fraud.")

The firm is claiming that Microsoft "issued materially false and misleading statements regarding the Company’s financial performance and its tablet computer, the Surface RT." It is claiming that the company's financial statements for the quarter ending March 31, 2-13 were "materially false and misleading" and that Microsoft officials made misleading positive statements about the Surface RT during the "class period."

Microsoft announced a $900 million Surface RT write-down as part of its Q4 2013 earnings report. Despite that fact, the company is continuing to push ahead with its ARM-based Surface RT platform and is expected to make available new Surface RT accessories and a new Surface RT "release" some time between now and June 30, 2014. 

A Microsoft spokesperson said the company had no comment on the class-action suit.

Topics: Microsoft Surface, Legal, Microsoft, Tablets, ARM


Mary Jo has covered the tech industry for 30 years for a variety of publications and Web sites, and is a frequent guest on radio, TV and podcasts, speaking about all things Microsoft-related. She is the author of Microsoft 2.0: How Microsoft plans to stay relevant in the post-Gates era (John Wiley & Sons, 2008).

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  • Where?

    Microsoft never said anything about the RT, until recently. Seems frivolous.
    The one and only, Cylon Centurion
    • What?!

      What?! Lawyers filing frivolous suits? Hard to believe!
      • They want sales figures

        This suit is to force Microsoft to reveal Surface RT sales figures. What a way to go about it
        • They're investor trolls

          Robbins Geller doesn't care about sales figures. What they do for a living is find stocks that have gone down, find some people who bought that stock when it was up, and then compose some legalese with which to file a class action suit. They're after one thing only: a cut of the take if the company settles or loses at trial.

          I do hope we can avoid litigating the case here on ZDNet with outhouse lawyers opining on how it will go. Microsoft has a lot of lawyers, they can deal with this sort of nuisance.
          Robert Hahn
      • Hardly Frivolous!

        READ the complaint in detail. Microsoft as a public share funded company has legal obligations that it manifestly has not met!
        • Lawsuit

          It is a frivolous lawsuit by Dracula lawyers.
    • If you'll just read the PDF at the link MJ listed

      You will find plenty of examples of Microsoft telling tall tales.
      • I did. I doubt that articles from PC World

        will have much evidentiary value.
      • Much of what the claim says is pure rubbish.

        Its clearly been written by someone who actually understands nothing about the vast majority of the tablet market.

        It makes it sound like other tablets, such as the iPad and Android based tablets do not operate on an OS that is a limited operations OS that uses particular applications that are preinstalled or installed by way of an online store.

        It makes it sound like the RT tablets were somehow hobbled by the RT operating system in some magical way that iOS and Android tablets are not hobbled. If this were indeed the case it would essentially void any possibility of selling tablets that were not iOS or Android based. And of course the lack of RT sales is based on this notion of the RT OS being at fault where iOS and Android are I suppose just fine.

        It fails miserably to mention the fact that RT sales were less than stellar for the very simple reason that the Windows tablets came in very late in the game and were up against juggernaut competition.

        The only real question is, did Microsoft knowingly mislead the public into purchasing stock based on reports of Surface RT sales and profits that were lies.

        The claim asserts that Windows RT is basically an abject failure, yet Microsoft has not simply given up on the Windows RT form factor and as of yet its actually impossible to truly claim its a failure. We do know that there were many sold and it appears that those who bought one seem to really like them a lot, much the same as those who own an iPad.

        The claim makes it sound like Windows RT sales strategies were secretive but clear attempts to plug the hole in a sinking ship, yet we all know here the very marketing strategies were broadly known by all through out the period. These things were broadcast usually in some significant advance and they were in fact discussed in articles right here on ZDNet and were without doubt, and for obvious reason complete public information.

        How is it that everyone with a brain who posts at ZDNet, and certainly pretty much every article writer here at ZDNet always said Microsoft was going to have a very long tough fight ahead in the tablet market, and many here who have no use at all for Microsoft actually predicted complete abject failure even worse than what it is for Microsofts foray into the tablet market, yet these investors had no concerns?

        It really only is a question if Microsoft actually mislead investors or not with reports of tablet sales that did not in fact exist. It is incredible nonsense the way this claim sounds, that its as much a problem of stock purchasers high hopes that the Surface would come in and kick the iPads hind end up and down the block and failed to do so. That would have been a story for the ages if that had of happened.

        Meanwhile, the claim itself refers to quote after quote in the media about Microsofts almost inevitable struggle to make high volume sales of the RT and the fact that MS wasn't speaking on the matter. I suppose stock purchasers didn't take any note of this?

        The complaint goes on and on about Microsofts value loss of unsold units of RT tablets they knew would need to be written down. On the other hand...

        There has been speculation by some I know who feel that this was a well known ploy, that MS needed some kind of kick start to propel them into the market and starting with over inflated prices, similar to an iPad, would make the later discounted prices appear like an irresistible bargain. I have been told the truth behind this rumor will only be proved with some certainty if MS goes on to sell RT's at the new lower rate at an ongoing basis.

        In any event, as the claims says, Microsoft is the worlds largest software producer, and they do still remain so, so good luck going after them unless they can prove Microsoft actually mislead people into purchasing stock based on inflated Windows RT sales figures they knew were lies.
        • Re: Totally confused as to your point. Windows tablets came in very late..

          Very late.. like over a decade ago. Smart apology, no doubt!

          Microsoft are grown up boys and gals, they don't need your half-baked defense. Eventually, they will just pay the price and go on.

          They don't care, why should we?

          Oh, and by the way "Microsoft is the worlds largest software producer"... in whose pipe dreams is this?
          • Apparently only not in yours

            take a look at
            Are you by any chance on some sort of reality bending medication?
          • Also try

            this more recent report
            I'm sure we could find a lot more with very little difficulty.
        • Someone Else's Fight

          I don't care who wins this one and I did not review the filing. If it makes it to trial, I expect to hinge on the omitted details of Jan-Mar Surface RT sales or the lack of a disclosure via guidance. By not being up front about the first full quarter of Surface RT's availability, Microsoft may have withheld material information about its devices business, a premise buttressed by the writedown 90 days later.

          Whether there's a basis for a suit under security laws — and one has to expect that Microsoft's lawyers were controlling the nuances of the RT write down as well as the earlier quarterlies — is something I'm not qualified to say. As to a law firm that frequently files on these issues, maybe sometimes they find something that has merits.

          But you, a seeming defender of Microsoft, could not deny that the Surface RT and Pro were the initial products of a transforming devices and services Microsoft, a message I suggest was crafted to resonate with Wall Street (especially given the timing, i.e., when Apple stock was at its peak.)

          Let's spell it out: Microsoft had a chance to discuss disappointing sales in April and had to chose between investor disclosure and confirming the naysayers' speculations, possibly dooming the RT as unwanted. Sometimes there are no good options and the grown-ups take the lumps.
        • There is a narrow margin on which the claims could be deemed valid

          Specifically, there is an inability to "side load" applications, like point of sale, medical, and other applications, by an enterprise. This inability has kept the surface out of the inventory and other markets, where its Microsoft origins might have caused it to have been trusted and successful.

          You argue that the iPad and Android tablets are similarly locked down; the iPad allows side loading by enterprise management enrollment under control of an enterprise, while Android devices allow side-loading as a direct option, and allow definition of multiple trusted "stores", which can include those operated by an enterprise.

          So there's a narrow, but valid argument there.

          The argument about software compatibility has both more and fewer teeth. It has more teeth because they've called this "Windows RT", rather than "Microsoft RT", or some other name which would not imply Windows software compatibility with general software.

          A secondary argument to the lockdown claim would be that, had side-loading been possible, or booting another OS (e.g. Linux or a version of Android, which is Linux-based) would have led to increased sales.

          This secondary argument is valid, but fallacious. The validity comes from the locked-down EFI - the so-called "secure boot path" which prevents these tablets from running an OS other than Windows RT - which does (so far) prevent running other OSs. The iPad has the capability of being "jail-broken", while Android devices have the capability directly, due to binary software distributions by Google and the manufacturers. The argument is, however, fallacious, since the tablet is effectively being sold at or below cost, which means it's a loss-leader for future software sales. The Microsoft XBox product line, and the Sony PS/2 and PS/3, as is common in the game console market, have also been sold as loss-leaders. When these systems were capable of running another OS, and were purchased as cheap devices on which to run Linux, they were simply losses. So arguing lost sales into the Linux or other non-Windows RT market is fallacious.

          The arguments about when Microsoft and its principals knew that Windows RT sales were bad, and what the strategic planning was involved in purchasing from partners and warehousing the devices - or if it was done as a result of a contractual trigger, rather than as a strategy - will have to wait for a trial. A lot of the arguments in this regard would likely be held in camera, and sealed, assuming it goes to trial without settlement.

          So yeah, there are some teeth here, but it's not a full set of 32. However, even a small number of teeth can cause you problems, when you get bitten.
    • $MSFT never said anything about the RT, until recently ...

      ... listed companies are obliged to report accurately by quarter ... so saying nothing when there is a problem breaks the rules. That's why Dell wants his company back: he sees problems and does not want to have to report them and watch the share price plummet.

      Seems MSFT want to conceal bad news, wait until its really bad, suffer a huge share price drop, then risk punishment by the authorities, then do Surface RT 2.

      Seems ... risky.
      Unless of course the same people researching trademarks like METRO and SKY are also doing the accounts :-(
    • Marketing is what it is called

      Since when did it become illegal to tout a product as better (or performing better) than it actually does? I believe this is called "marketing."
      • Easy Question

        When it's in the context if a discussion of financial results for the shareholders, regulators and investors.

        Though some marketing messages may be included in the ancillary activities surrounding releasing of results, one has to tread a careful line, lest one is accused of stock manipulation, insider trading, or material omissions.
  • Microsoft's been telling tall tales about Surface RT for a while

    So, the suit really isn't a surprise. They may face similar actions over the portrayal of Windows 8 sales. [Look on there new "numbers" site and tell me how there are 100 million sales of Windows but only 250 million downloads from the Windows App Store, yet Windows 8 is selling well and Metro apps are the future?]
    • Oh really?

      Telling tales about Surface RT? Oh really now... and where/to whom have they told these tales?

      Every single one of the stats you discuss have nothing to do with Surface RT sales, which is the heart of this so-called conspiracy, so what point are you trying to convey?

      This is utter nonsense created by people who clearly fail to understand how stockholding works.
      • Sounds baseless... ambulance chasers hoping to make a quick buck. I wonder where the class action part comes from. What was the impact to shareholders? It's not like people who bought the shares assuming RT was doing extremely well are now sitting with a penny stock.