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BLOG: Microsoft's 'terrible, horrible, no-good, very bad' week

Caroline Craig | Aug. 19, 2013
This week's damage: Surface RT lawsuits, botched security patches, SkyDrive and outages, and a subpar Windows 8.1 leak.

With apologies to author Judith Viorst, Microsoft has Alexander beat hands down. The tech giant came under the gun from all directions this week, with fallout from its Surface RT fiasco resulting in a lawsuit on behalf of disgruntled shareholders; a Black Tuesday that botched six — count 'em, six — Windows updates; outages for SkyDrive and still ongoing issues with; and a leaked Windows 8.1 build that failed to inspire confidence that the company will turn things around any time soon.

First things first: Does it really come as a surprise that Microsoft is being sued for misleading shareholders about Surface tablet sales? After closely guarding the secret about how many units it was actually selling (or not), Microsoft finally announced in July a $900 million Surface RT write-down that it actually put on the books in June — what InfoWorld's Woody Leonhard called a "multibillion-dollar boondoggle." Microsoft's next-day share price took its biggest dive in more than four years, plunging more than 11 percent.

After that debacle, InfoWorld's Bill Snyder called for CEO Steve Ballmer to go, saying "the Surface combines the worst conceptual mistakes of the Newton and the Edsel: technology that doesn't work plus a product that completely misses consumer expectations."

That hammering in your ears is the sound of nails being driven into Surface RT's and Ballmer's coffins.

Before Ballmer goes, he'll face his day in court if the law firm Robbins Geller Rudman & Dowd has anything to say about it. Calling Microsoft's entry into the tablet market an "unmitigated disaster," the lawsuit charges that Microsoft knew the launch had gone badly and deliberately kept investors in the dark. Citing Ballmer and marketing leader Tami Reller, among other execs, the suit states that the "defendants caused Microsoft to issue materially false and misleading financial statements and financial disclosures ... to forestall Surface RT's day of reckoning."

Speaking to the Seattle Times, University of Washington law professor Sean O'Connor said he was unconvinced that Microsoft violated generally accepted accounting principles with the timing of its write-down. But Microsoft execs' statements about the momentum of Surface were another matter. "Based on those kinds of very positive statements, people could say they bought stock because they thought things were going swimmingly well," when Microsoft knew they weren't. "That could be a problem for Microsoft," O'Connor said.

Lest you say it stretches credulity to think there were people who thought things were going "swimmingly well" with the Surface tablet, InfoWorld's J. Peter Bruzzese held out hope this week that the Surface RT 2 tablet will be worthwhile. For one, Bruzzese says, it will include Outlook, the "killer app" for the Surface RT, not to mention the new Tegra 4 chip, which could perhaps address the tablet's performance issues. "I'm not quite ready to deliver the eulogy for the Surface RT," he writes. "The Surface brand and product line is salvageable. Let's see how it goes in Round 2."


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