Shareholders sue Microsoft over poor Surface RT sales

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Shareholders sue Microsoft over poor Surface RT sales

Unmitigated disaster alleged.

Investors have taken legal action against Microsoft and several of its top executives, alleging they were misled over sales of the company's Surface RT tablet.

The class-action lawsuit is filed on behalf of Gail Fialkov, a Microsoft shareholder, and alleges that Microsoft and executives Steve Ballmer, Tami Reller and Frank Brod violated two sections of the United States Exchange Act with its Surface RT marketing.

Documents filed with the Massachusetts District Court allege that Microsoft "led the market to believe that [its] launch of Surface RT had been executed in a measured and conservative fashion so that it could observe and understand its progress and outcome".

However, the litigants claim that Microsoft knew but didn't tell investors that the company's "foray into the tablet market was an unmitigated disaster which left it with a large accumulation of excess, overs-valued Surface RT inventory".

The plaintiffs claim limitations in Windows RT are the reason for the Surface RT failing to sell. It isn't fully compatible with Intel-based versions of Microsoft's operating system, meaning existing Windows applications don't run on it. 

Concerns with software compatibility saw Windows RT devices receive "unfavourable user reviews" and have been "largely disregarded by consumers" despite Microsoft slashing the price of the tablets and bundling them with a free Touch cover that doubles as a keyboard.

In July this year, Microsoft reported it had taken a US$900 million charge on unsold Surface RT inventory, and the complainants say the company's market value dropped by US$34 billion on the news.

To support their claims, the plaintiffs point to Microsoft original equipment manufacturing partners such as Samsung, HP, Toshiba and Acer dropping plans for Windows RT tablets. There are currently only three Windows RT based tablets in the market apart from Microsoft's Surface RT, made by Dell, Asus and Lenovo.

The litigants are seeking unspecified damages from Microsoft.

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