DailyTech - Microsoft Likely Lost Over $60,000 Per Kin Phone as Verizon Pulls the Plug

Submit News

Gadgets Microsoft Likely Lost Over $60,000 Per Kin Phone as Verizon Pulls the Plug
Jason Mick (Blog) - July 19, 2010 1:07 PM

33 comment(s) - last by Smilin.. on Jul 20 at 12:52 PM

The phone was rumored to have sold around 8,000 units

Microsoft's Kin smartphones made Palm's struggling Pre look like marketing genius. Released exclusively on Verizon about 2 months back, the pair of phones marked the culmination of Microsoft's reportedly $500M USD purchase of Danger (makers of the Sidekick).

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.

Following Microsoft's decision to pull the plug on future Kin-related endeavors, Verizon this week decided that it had seen enough. It is ceasing sales of the phones, pulling them from store shelves, and shipping the remaining supply (which is mostly untouched) back to Microsoft.

While it's no real skin off Verizon's back considering the carrier's well-packed stable of smart phones and plethora of smart phones, the metrics of the screw-up for Microsoft are staggering.

If you assume to $500M USD Danger purchase cost and that 8,000 units were sold, that works out to a cost to Microsoft of $62,500 per phone. At that rate Microsoft might as well have been giving away small bars of gold with a phone built in. And that's not even including the two years of engineering that Microsoft financed to launch the phone and the extensive advertising campaign.

As Microsoft readies Windows Phone 7, its surely a bit nervous as it watches Verizon nail Kin's coffin shut. Its room for error in the smartphone arena is close to exhausted.

Comments

Threshold

Username
Password
remember me

This article is over a month old, voting and posting comments is disabled

....

By sviola on 7/19/2010 1:27:51 PM , Rating: 2

Eventough the phone was a flop, I doubt the investment Microsoft did has been for nothing. Probably, all the community related features and techs they got from Danger will make it to the Windows Phone 7, even if only the underlaying the tech.

RE: ....

By Smilin on 7/19/2010 1:34:37 PM , Rating: 4

Something similar to the Kin studio is already going to end up in WP7.

Farewell Kin...you're a great little device.

Parent

RE: ....

By B3an on 7/19/10, Rating: -1

RE: ....

By Staples on 7/19/2010 6:40:24 PM , Rating: 2

I have heard nothing but good things about the device from the people who have had the chance to use one. Not sure why you think it was so bad.

Parent

RE: ....

By thrust2night on 7/19/10, Rating: -1

RE: ....

By afkrotch on 7/19/2010 10:17:35 PM , Rating: 2

Low sales doesn't equate to bad device. It's just a device with low sales. Ferrari has low sales, but does that make it worse than like a Kia Sportage?

Sure the Kin is hardly successful, but if the 8000 ppl who purchased one are loving it, than what was bad about it, aside from sales? I couldn't tell you if 8000 ppl actually like it or dislike it.

Parent

RE: ....

By Belard on 7/20/2010 12:37:49 AM , Rating: 3

Back in the 80s~92.

The Amiga computer was the most powerful PC you could get.
- Multi-tasking OS since 1985... it would take MS 10 years to come up with Windows95... and Apple 15 years for MacOS X.
- Costs less than a "PC CLone" and of course Macs ($5000+)
- Color graphics with 4096 colors (no add-on card required)
- Stereo Sound (no add-on card required)
- Fast. A 7mhz Amiga runs circles around a 25Mhz 386 with Win3.0

In the end, about 1 or 2 millions Amigas were sold world-wide.

They were very good computers than most people could afford compared to anything else. But obviously, they failed in the market due to the company, Commodore being completely stupid.

Parent

RE: ....

By sebmel on 7/20/2010 10:48:44 AM , Rating: 2

What people appear not to know about this story is that Microsoft bought Danger for its software, not just its programmers. They continued development for a while and at some point management decided that this being Microsoft every product must be based on Windows. So the dumped the investment they had just made, totally disheartening the Danger developers they had brought in house and set back the Kin project by 18 months.

The result is likely to be that many of those developers will leave Microsoft and the entire investment will have been lost.

I wonder what the figures are for the Xbox... without even adjusting for inflation that has lost over $10 billion. A more valid figure would be loses per customer since over 50% of the previous version of the Xbox failed.

Parent

RE: ....

By robinthakur on 7/20/2010 6:46:33 AM , Rating: 2

Oh come on, be fair, this is a complete disaster and how you can compare it to Ferrari's businesss model is hilarious. I bet Microsoft is especially overjoyed that those 8000 people are happy with their device...! See how much those 8000 people love it when all updates stop and Verizon don't want to know about supporting it, when they check out other phones and realise that they've been comprehensively ripped off.

The phone clearly had issues which made it unappealing to customers, mostly to do with the contract pricing, weird and offputting adverts, but also to do with strange quirks in the software and unfinished features when it shipped. The little one is quite cool looking, with phenomenal battery life, and an interesting (sometimes broken) approach to Social Networking integration, but considering the features in the segment they were introduced in and for the price this was an utter train wreck that many saw coming long before it hit the shelves. Everyone apart from possibly Microsoft apparently, which should make those waiting for WP7 slightly nervous as a lot of the people working on Kin are now working there. Its clear why MS is myopically following Apple's path of development and attempting to ape their marketing with their new OS because they clearly have no clue how to market their own products, which is sad when you look at a success story like W7.

Parent

RE: ....

By Smilin on 7/20/2010 9:19:53 AM , Rating: 2

I've been using one for a month. Pretty sure I'm more qualified to form an *accurate* opinion than you.

Parent

Numbers are a little disingenuous

By nafhan on 7/19/2010 3:46:00 PM , Rating: 5

The $60,000 per phone is a little disingenuous for a couple reasons.
1. It assumes that there were no further costs after the Danger acquisition. So, the actual amount lost was probably quite a bit higher than $500 mil.
2. If MS had given up a year ago and not launched Kin at all they certainly would have saved some money, but the amount lost per phone would have been infinite!

RE: Numbers are a little disingenuous

By ghost03 on 7/19/2010 5:41:40 PM , Rating: 2

and another reason...

3.) Microsoft still has a load of intellectual property (among other resources) from danger, which can be rolled into other products.

They only lost $60k per phone if Danger, and all of its assets, vanished into thin air upon canceling the product.

Please ease off of the misleading, overly-dramatic headlines DT.

Parent

RE: Numbers are a little disingenuous

By RamarC on 7/19/2010 8:31:48 PM , Rating: 2

if MS has good accountants (and they do), they'll likely be able to create a huge r&d loss and declare the remaining product, mfg equipment, and retail sales contracts worthless. much of thoses losses will be tax deductible or have some tax credits. so, the "real" loss may be smaller but the loss filed with the SEC will be HUGE!

Parent

RE: Numbers are a little disingenuous

By ChristopherO on 7/19/2010 11:50:03 PM , Rating: 2

So wait, if I buy several Kin, does that mean Microsoft will pay off my mortgage??? That'd be nice. I only wish.

Seriously though as others have said. MS didn't buy Danger because they loved the sidekick. They needed developer talent and patents. Danger had a lot of devs, and a lot of IP.

I'm sure that will get rolled into Windows Phone. DT *is* being overly dramatic here, because they would have never wrote the headline if the Kin never existed... And it wouldn't have surprised everyone if MS transferred all the Danger assets to Windows Phone as soon as they acquired the company.

The surprising thing was that they released the Kin to begin with. It was just, well, uncalled for. At the very least it would have *only* made sense with T-Mobile if it was offered to Sidekick users as an upgrade. Outside of that, very little purpose.

And lets face it... Sidekick is *yesterday's* news, but they did make a huge splash when it was released -- it was a trendy thing for teens to have. The Danger crew *does* know how to make a splash, and that's something apparently missing at the mobile division at Microsoft.

Parent

RE: Numbers are a little disingenuous

By robinthakur on 7/20/2010 7:02:12 AM , Rating: 2

You're right, and a great way to make Danger's devs stay on board is to incorporate their valuable IP and experience into a device which is seen as a complete joke throughout the industry thanks to a lack of management and leadership from the top at Microsoft, god-awful marketing, and half-assed execution. The Kin was an interesting concept device if executed correctly, but things like the lacking facebook integration (only the news feed was really visible) and the odd retro-fitted presence of Twitter integration not to mention the other lacking things like Geotagging and strangely absent features made it seem like it was better as a concept.

As a device that made it to market, it actually mmanages to make Apple's handling of the IP4 fiasco look competant which is saying something. The most sensible thing MS could have done for their bottom line was kill it, after all they know the very real PR damage of having an embarassingly unpopular product floating around long after its sell-by date, destined only to be a drain on resources and morale(Zune, Vista, RROD) Thank god the Courier never made it out of R&D at this rate!! You KNOW that if it had come out it would be ridiculously expensive, lacking seemingly obvious features and sell practically nothing. What on earth is going on at Microsoft these days? I would like to believe that they'll get their act together for Windows Phone 7 but I won't hold my breath, Shareholders, why is Balmer still in his job? :\

Parent

RE: Numbers are a little disingenuous

By Chocobollz on 7/20/2010 10:52:56 AM , Rating: 2

quote:
2. If MS had given up a year ago and not launched Kin at all they certainly would have saved some money, but the amount lost per phone would have been infinite!

LOL yeah but I think it'll be more like a division by zero error! LOL

Parent

Management Fail

By corduroygt on 7/19/2010 1:44:13 PM , Rating: 1

This is a colossal fail in MS mobile device management. Engineering-wise the Kin devices are decent, and they're just limited smartphones designed for kids. However forcing the $30 data plan on them doomed these from the beginning.

AT&T has a $15 data plan (before the tiered pricing came) for non-smartphones that you can use with full-featured smartphones like a nokia n97, they could surely have talked with AT&T and only have a $15 plan for the Kin, which would made them a lot more successful. This is simply uninformed and incompetent management.

RE: Management Fail

By theapparition on 7/19/2010 2:00:49 PM , Rating: 2

But why even bother with AT&T's poor network? Verizon currently has a $10 plan for "Advanced Feature Phones". That's exactly what catagory they should have been sold as. Instead, Verizon tried selling you an Aveo for the same monthly payment as a Corvette.

Parent

RE: Management Fail

By tng on 7/19/2010 4:31:02 PM , Rating: 3

Verizon or AT&T, doesn't matter. I am on the road about 6-8 months of the year and your favorite network is hated somewhere because of poor service/reception. Seen AT&T have full 3G signal where you could not get even an edge connection with Verizon and visa versa.....

Just depends on where you are at.......

Parent

RE: Management Fail

By corduroygt on 7/19/2010 9:52:13 PM , Rating: 2

Sure, I didn't know VZ also had such a plan. They should have offered their phones on as many carriers as possible with these "lite" data plans though and it might have succeeded.

Parent

Notification ..

By teebone0075 on 7/19/2010 4:53:30 PM , Rating: 2

So - has someone notified the next of kin? :-)

RE: Notification ..

By CptTripps on 7/19/2010 7:18:35 PM , Rating: 2

Oooooh, good play sir!!

Parent

RE: Notification ..

By Smilin on 7/20/2010 9:20:45 AM , Rating: 2

Weak sauce. Try.

OMG They killed Kinney! You bastards!

Parent

Meh

By dice1111 on 7/19/2010 1:26:23 PM , Rating: 2

I saw so many commercials for this, but nothing about it seemed interesting to me. I am not supprised by this. I admit though that I need a phone that works as a phone and I can install software tools on it. Social networking is the last thing on my list.

Microsoft really needs to pull off something stylish, dynamic, and funcitonal very soon to remain in this market or they are just wasting money.

RE: Meh

By CptTripps on 7/19/2010 7:20:28 PM , Rating: 2

If these would have been dirt cheap with a cheap data plan this would have been the perfect device for teens. At the price they sold at there was no reason not to buy something cooler that could place calls as well.

Parent

Tell you what MS...

By Motoman on 7/19/2010 2:48:45 PM , Rating: 4

...you can just give me $50,000 - and keep the phone! You'll save nearly $10k!

Kin stop it already

By damianrobertjones on 7/19/2010 3:19:50 PM , Rating: 2

The kin is dead, gone, so long.

Do we really need another article?

RE: Kin stop it already

By vapore0n on 7/19/2010 4:50:11 PM , Rating: 2

talk about beating a dead horse

Parent

Who is responsible...

By androticus on 7/19/2010 11:44:15 PM , Rating: 2

I have been watching Microsoft with my mouth hanging open for many years now. Failure after failure after epic failure. Yes, the money from Windows and Office still rolls in, but what about new product? And what about Vista, the 1B$+ Xbox 360 debacle, the failure of Windows Mobile and the belated release of Windows Phone 7, now the kin, and on...

When are shareholders going to hold STEVE BALMER accountable for his company's long, consistent string of epic failures???

RE: Who is responsible...

By Smilin on 7/20/2010 12:52:58 PM , Rating: 2

Vista is done.
The RROD is done.
The delay on WP7 is over.

You're a couple years behind on your griping man. Need to come up with something new.

failure after failure eh? That's what you call $15 BILLION bucks quarter after quarter?

Parent