Microsoft Surface RT – an unmitigated disaster
Nobody likes to admit to any enjoyment in “I told you so.” It is therefore with huge regret and personal pain that I now say, “I told you so.”
On August 7, 2012 – just over a year ago, this blog said: A Microsoft-made tablet? Big mistake. More specifically I added
But Microsoft’s solution is just plain wrong. It is planning to build its own tablet, to compete with the iPad and Android.
This would be a mistake…
Almost exactly one year later, on August 12, 2013, ‘Gail Fialkov, individually and on behalf of all others similarly situated’ filed suit against ‘Microsoft Corporation, Steven A Ballmer, Peter S Klein, Frank H Brod and Tami Reller’ in the US District Court, Massachusetts. The suit claims
What Defendants knew, but failed to disclose to investors, however, was that Microsoft’s foray into the tablet market was an unmitigated disaster, which left it with a large accumulation of excess, over-valued Surface RT inventory.
Despite costly attempts to spur the Surface market (such as a free $100 dollar magnetic cover/keyboard and a 30% discount on the price), ‘nothing generated meaningful sales of Surface RT.’
Then, on July 18, 2013, Microsoft issued a press release announcing that its financial results for the quarter ended June 30, 2013 had been adversely impacted by a $900 million charge related to a write-down in the value of its Surface RT inventory. In truth, however, the value of such inventory was materially impaired by March 31, 2013.
On this news, Microsoft common stock suffered its biggest price decline in more than four years, plunging $4.04 per share, or 11.4%, on very heavy trading volume to close at $31.40 per share. The magnitude of the decline in the price of Microsoft’s stock eviscerated about $34 billion of the company’s market value.
The action is claiming that anyone who purchased Microsoft stock between April 18 2013 (that is, just after the date at which it claims Microsoft was aware of the excess stock) and 18 July 2013 (that is, the date of its announcement of excess stock) suffered a material and unnecessary hit on their investment.
Whether Microsoft will issue a defence based on the public availability of this blog that had earlier warned all and sundry that the Surface was a big mistake and that they therefore had prior knowledge of the inevitability of the unmitigated disaster remains to be seen. But it could be, “Well, he told you so.”