Class-Action Lawsuit Filed Against Microsoft Over Surface RT

Lawfirm Robbins Geller Rudman & Dowd has filed a class-action lawsuit against Microsoft on behalf of investors alleging a violation of federal securities law, writes Neowin today. Essentially, the firm claims that Microsoft knew that the Surface RT wasn’t doing well, but didn’t adequately tell investors about that fact until its latest earnings reports at the end of July.

By now the story is pretty well-known. Microsoft’s Surface tablet—in either the mobile-OS style RT or the full-PC Pro—has failed to find much in the way of popularity among consumers. It’s a pricey bit of hardware, and in its first generation, it’s failed to really catch on due to a lack of software support and, well, the fact that it costs too much money for something that not too many people seem to want. Sure, I want one, but I don’t have the kind of money to support that want, so that basically means at least one less Surface owner. But I digress.

The complaint filed by Robbins Geller Rudman & Dowd—which you can read right here—says that Microsoft actively misled its shareholders when releasing the Surface RT and Surface Pro by not publicly disclosing how poorly it was selling. While that may be true, and while I also am not a lawyer, I fail to see how Microsoft really did anything wrong here, aside from releasing a product that failed. The complaint cites article after article that bases estimates on the projections of analysts saying that the Surface wasn’t selling well. It also cites Microsoft’s attempts to spur interest in the product by offering a promotion.

But what the complaint fails to do is actually point to any evidence that Microsoft was intending to mislead its shareholders. In fact, the way I see it, Microsoft’s decision to not discuss the Surface’s poor sales and lack of support was a way to help shareholders, at least in the short term. If the company had disclosed how poorly the device was doing, what little support there was for the thing would’ve dried up even quicker. Is a company supposed to come out and talk about a failure while it’s ongoing? Or wouldn’t it be a better business decision to try and push through it and get people interested before it has to offer up financial reports for the quarter?

Obviously I don’t understand the ins and outs of federal securities laws, so I won’t claim to know the lawfirm’s business better than they do. But to my knowledge, companies release products that either succeed or fail all the time. I wasn’t aware that it was a crime worthy of being sued over.

Now, if the Surface had been exploding and the suit were filed over Microsoft knowingly releasing exploding tablets among the people, that’d be something different.

I also want to point out: I’m not Mr. Microsoft over here. I’m not the company’s biggest fan, and, in fact, earlier today I wrote about how Microsoft’s Xbox division was doing a lousy job of keeping its consumers informed—and was, in fact, actively misleading its own customers by saying one thing is true, and then contradicting that statement weeks or months later. Microsoft kind of sucks in a lot of ways.

But is the company guilty of misleading investors? Only if those investors are too dumb to see that the Surface was failing all on their own. If a shareholder’s only source of information is the company in which he holds stock, then he’s probably not very good at investing.