Surface Tension: Microsoft Hit With Tablet Lawsuit
Microsoft's tumbling stock prices and its foray into the tablet market have set off legal sparks.Microsoft is the target of a class-action lawsuit on behalf of investors alleging that the software titan issued "materially false and misleading financial statements" at the close of its fiscal 2013 third quarter in violation of generally accepted accounting principles and Securities and Exchange Commission rules. At the center of the allegation is Microsoft's slow-selling Surface RT tablet. "These false and misleading statements materially misrepresented the true financial effect that Surface RT was then having on the Company’s operations," asserts the lawsuit, filed on behalf of shareholder Gail Fialkov and others who bought shares in the company between April 18 and July 18 (the "Class Period"). Those statements, according to the plaintiffs, "caused Microsoft common stock to trade at artificially inflated levels." The stock reached $36.43 on July 16, 2013, two days before the company announced its fourth-quarter earnings. The subsequent drop in value caused "real economic loss to investors who had purchased Microsoft common stock during the Class Period," states the suit. As of this writing, Microsoft stock trades at $31.90. Microsoft has not responded to a request from eWEEK for comment.
The company reported diluted earnings of $0.59 per share for its fiscal 2013 fourth quarter on July 18, missing analyst estimates of $0.75 a share due, in part, to a $900 million charge related to Surface RT. "We reduced the price of Surface RT by $150 to $349 per device. As a result of this price change, as well as inventory adjustments for related parts and accessories, we recorded a $900 million charge to our income statement," explained Microsoft Chief Financial Officer Amy Hood during the earnings call.