The money-down-the-drain story never told

Summary: Now that "KIN" is dead, costing Microsoft a lot of money, there is early evidence that Vista Phone 7 [sic] will provide no turnaround

IN the previous post we covered Microsoft's somewhat dodgy results, which were hyped up in the press while not impressing investors. This post will take a look at Microsoft's mobile business, which Microsoft loves to hide (sometimes by folding it into another compartment, thus concealing its individual contribution, or lack thereof).

First of all, let's consider "KIN". It's not just another project somewhere at the edge of the galaxy. This was Microsoft's attempt to make a breakthrough in the mobile arena. Microsoft would of course prefer to deny this now; by the time this toy came out Microsoft must have predicted that it would have no chance. Even the "KIN" spokesman Questlove was not using a "KIN". Hilarious! To quote the source of this claim, "the swift death of the Kin was forecasted by the fact that even spokesman Questlove, who appears in the ill-fated television ads, doesn’t use a Kin himself; according to his verified Twitter account, the Roots bandleader uses a BlackBerry."

Watch Microsoft weep:

• Kin outcome not sitting well inside Microsoft



• Kin debacle embarrasses Microsoft



• Microsoft’s Kin sets flop record



• Shocking: Microsoft Kin did not sell well. At all.

Someone created a memorial site for "KIN" [1, 2], which lived for less than two months. The memorial site too is already dead, having gotten more visitors than "KIN" owners.

It’s understood that the software giant shifted fewer than 10,000 phones in that time.

The memorial site is said to have attracted over 32,000 visitors in just one weekend. That's more than four times the number of phones sold, depending on whose source is more trusted when it comes to sales figures. Todd Bishop confirmed that the memorial site is already dead, just like the "KIN". So much for a memorial. To quote: "A tongue-in-cheek online tribute to the short-lived Microsoft phone has been taken offline by the online memorial service, Forever Missed, where it was hosted. CNet News.com's Ina Fried reports that the service put an end to the comedy at the request of other users who "were none too pleased to see a gadget memorialized in the same way as their departed loved ones.""

“A tongue-in-cheek online tribute to the short-lived Microsoft phone has been taken offline by the online memorial service, Forever Missed, where it was hosted.”
      --Todd Bishop"KIN" management was fired or just left and the "Microsoft blame-game begins", argues an accumulator of articles on this subject.

"Microsoft writes down $240m on Kin debacle," says BoingBoing. "This is on top of its $500m acquisition of Danger, absorbed in order to develop it," BoingBoing adds. "Notwithstanding Kin's shortcomings as a product, the most entertaining aspect of the cock-up is that it appears to be the result of ego battles in Redmond: rumor has it that Kin was throttled in its billion-dollar crib by an executive who saw it as a threat to Windows Mobile."

The number is confirmed by many other sources, such as:

• Microsoft Kin cost the company at least $240 million



• Failed KIN line cost Microsoft as much as $240 million



• KIN cost Microsoft over $240m and ate up Xbox profits

"Microsoft repeatedly notes cost of discontinuing KIN phone as driving up cost of revenue," says Joseph Tartakoff, who claims that Microsoft's online losses increase (expectations were set low on purpose, as usual).

"Microsoft Skips Over Mobile And Talks Xbox Live Instead," says this headline. Microsoft is trying to hide its failure in phones, just as it has been doing for several years now.

This whole "KIN" story is something which we wrote about last month when we quoted John Gruber as saying that only 503 "KIN" phones had been sold. IDG continues to rip the phone apart [1, 2] and CNN says that even days ago Microsoft continued to advertise "KIN". To quote: "But all is not lost! I was amused when I visited the official Kin website Wednesday evening to find that the KIN marketing campaign is still alive and well.

"The flashy hipsterish video still plays, the music still blares, and the siren call of "buy now" still flashes proudly. Oops."

“Microsoft Nick apparently tries to make Microsoft look better by announcing the death of "KIN" in the same post in which he announces Google's Nexus One dying.”It was several days before this report that "KIN" was still available to last minute buyers. The "remaining supply [were] headed to unknown", says this report (another report says they got sent to Microsoft). Microsoft Nick apparently tries to make Microsoft look better by announcing the death of "KIN" in the same post in which he announces Google's Nexus One dying. Since when does Microsoft Nick cover Google? He never does. It's a blog dedicated just to Microsoft. We saw this talking point elsewhere, but maybe it's accidental. Later on we'll show how Microsoft 'injects' itself into news about other companies, notably Google.

Microsoft is still updating the software for the few owners of "KIN", based on numerous reports [1, 2]. At least they cater for naive victims who bought the darn thing.

This whole project continues to be ridiculed by the press [1, 2], which harms Microsoft's image (and future) a great deal. Joe Wilcox offers Microsoft some advice and other Microsoft boosters cannot help showing how Microsoft's smartphone business dies. It's not about pricing, contrary to some inane claims. Here is one last look at "KIN", of which they are said to be 8,000 units out there (actual numbers vary between 500 to "less than 10,000"). Daily Tech argues: "The phones lacked features found in Android, the iPhone, or other modern smartphones and were marketed with a series of controversy-laden ads. In the end they reportedly sold around 8,000 units."

If that number is correct, then Microsoft sold on average ~150 "KIN" phones per day. Google recently stated that it activates ~160,000 Linux phones per day.

If one goes by the numbers from Gruber (as many sources still do, e.g. [1, 2, 3, 4]), then Android/Linux outsold Kin 16,000:1. Wow!

To quote one article: "If John Gruber's "well-placed little birdie" is correct, it's possible that I have more kin than Microsoft has Kin sales. The Apple guru cites a source saying Microsoft sold a paltry 503 Kin phones before pulling the plug at the end of June.

"By my count, that's less than 10 a day over the 56 days between the Kin's May 6 launch and June 30 demise. For contrast, consider that Apple announced it sold about 37,000 iPads a day in the 80 days following its most recent product launch."

“It is worth stressing that the failure of "KIN" is likely to be sign of Vista Phone 7 [sic] failing.”One writer says it doesn't matter which number is right as the numbers are minuscule anyway. "Reports on the number of Kin devices sold by Microsoft range between 500 and 10,000," he argues. "The actual number doesn't matter."

It is worth stressing that the failure of "KIN" is likely to be sign of Vista Phone 7 [sic] failing. Some Microsoft boosters have already acknowledged that and HP is essentially dumping Vista Phone 7 before it's even out. HP goes with the Linux-based WebOS instead. Yes, WebOS is one of the worthy contenders in this arena.

WebOS is also coming to tablets quite soon; Microsoft lost this race a long time ago and Tim Gideon says: "Hmm. So Microsoft is basically just shipping Windows 7 and having "hardware partners" make the tablet. Not only will this device not be a Zune, but it seems like there will be several iterations. This sounds an awful lot like the way Microsoft develops operating systems for PCs and then lets hardware vendors build the machines. In other words, it's business as usual." There are more such analyses (like this one) and none is particularly optimistic.

Well, those "hardware partners" ought to be named. Microsoft has got just about nothing but promises. Those tablets are a blow to both Intel and Microsoft because this is a race between Apple and Google with the Linux-based Android. Neither of them uses x86 architectures, perhaps with few exceptions. It's just too unsuitable for mobile devices.

We generally distrust Apple not just because it outgrows Microsoft. Watch what it's doing to Microsoft these days:

• Apple is world’s most valuable brand: Forbes



• Apple tops Forbes most-valuable brands list, Microsoft follows



• The iPad caught Microsoft with its pants down



• Apple could bypass Microsoft in terms of revenue

The Microsoft-sympathetic press says that "Microsoft shrinks again" because of new Microsoft layoffs (some in Fargo are affected, but probably not in places like India where Microsoft usually expands).

Microsoft's booster Paul Thurrott and other boosters wrote about it [1, 2, 3, 4] in a face-saving manner and one financial site argued that it's "Time For Microsoft To Reorganize And Focus".

"KIN" is named as part of the problem. The news about the layoffs and the death of "KIN" came only days apart.

But despite its minimal numbers, the layoff's timing couldn't worse. Why? Because Microsoft's review process strikes low-level employees as capricious, and unfair, especially following the Kin debacle.

One Microsoftie groused to us, "We're supposedly a performance culture but we never seem to fire anyone for shit performance. We always let them leave on their own terms as opposed to calling it out like it is. So now Roz Ho, Andy Lees and Terry Meyerson [sic] keep their jobs in light of one of the biggest screw-ups in the history of product launches."

Microsoft's former AstroTurfer Don Dodge [1, 2, 3, 4, 5, 6] says that Microsoft is no longer a growth company, so it should slash R&D. To quote the article (also in SF Gate), "Microsoft needs to accept that it's not a big growth company, slash R&D, and give up on its silly online efforts, argues ex-Microsoft employee and current Google employee Don Dodge on his blog."

Well, Dodge ought to know that Microsoft realised this too. it's already trying this route and to further cut expenses it is also culling employees and paying them less (by bringing them on visas or sending jobs abroad).

“Microsoft needs developers developers developers developers because it threw away all their prior applications when it buried Windows Mobile.”Microsoft's booster Peter Bright spreads the inane idea that Microsoft should make its own phone [1, 2], but that's more or less what it tried with "KIN" and such a strategy didn't work out for Google, either. It alienates partners too. "It’s Too Late for Microsoft To Build Its Own Handset," argues GigaOM. So what else could possibly work out then?

Well, how about more marketing for a future phone that does not exist yet? Microsoft embraces Sevenwashing with similar slogans and graphics, probably trying to associate the two which are totally separate (phone and desktop platforms). The taglines are just exceptionally lame and Linux-powered phones will most likely continue to gain; their main competitor seems to be Apple, not Microsoft. To quote another new article: "The instant demise of Microsoft's Kin phone is one facet of the challenge Microsoft faces. The broader issue is that Redmond is up against the same kind of juggernaut in smartphones that it created (and still maintains) in PCs."

IDG says that "Kin's death may signal mobile morbidity at Microsoft" and Daily Tech argues that "Microsoft Has to Go Back to Mobile Phone Drawing Board" (it already has, several times in fact).

There is negative feedback coming from those in possession of Vista Phone 7 ("a couple of developers questioned about Windows Phone 7 have been unimpressed so far.") and Microsoft usually needs to bribe them to even care about the phone/platform. Microsoft needs developers developers developers developers because it threw away all their prior applications when it buried Windows Mobile.

"It's pathetic," says one person, "Windows Phone 7 is being developed by idiots." To quote the ending:

Conclusions:

* Windows Phone 7 should be called Windows Phone 1.0 not only because it is being made anew and lacks compatibility to old Windows Mobile, but also because it misses out on many features that old Windows Mobile had * Microsoft mobile employees are idiots. If this incompetence with lack of features in Windows Phone 7 will continue, then Windows Phone 7 will be huge flop and even Steve Ballmer will be fired.

OpenBytes says that there is "mutiny in the [Microsoft] MVP ranks" because they -- unlike some others (including full-time Microsoft staff) -- cannot receive a phone from Microsoft free of charge, not yet anyway.

We have regularly covered the “gifting” of companies to those that comment on the net. For me there can be no better way to ensure loyalty as the receiver of the gift(s)/awards not only showers praise on the giver out of gratitude, but continue that praise in the hope more freebies are forthcoming.

All this is great for the giver, you have a pimp for your products who will flood every forum they visit with comments in favor of your company. Of course the problem comes when the gifting stops; and we may be seeing an example now.

It’s being reported that MVP’s (of the Microsoft ilk) are a little upset that their sugar daddy is not providing them with a free Windows Mobile 7. We heard recently that Microsoft will be giving them out to employee’s (no doubt to boost the numbers) and whilst I went on record by saying prior to its release it will crash and burn, there’s nothing like a freebie and some of the MVP’s want a piece of the action.

When it comes to Vista Phone 7, Microsoft is deliberately removing choice because Bong [sic] is the sole default option. From the article we learn that "Consumers shouldn't expect to be overwhelmed with search options if they decide to buy Windows Phone 7 devices. A high-ranking Microsoft employee has revealed that there will be only one default search engine: Bing." But this thing is going nowhere. Not giving users what they want (probably Google as default or at least an option) is the way to drive them away. In the next part we'll say more about Google's impact on Microsoft and why it terrifies the convicted monopolist. ⬆