Thursday, July 01, 2010

Kin's dead, Sidekick's dead, and what does Microsoft have to show for them?

Yesterday, Microsoft announced that it killed its Kin mobile phone line, just two months after it was launched. The Kin won't be rolled out to Europe, and production has been halted on the two models sold in the U.S. Verizon will continue to sell existing inventory until it runs out. Today, T-Mobile announced that it's discontinuing sales of the Sidekick LX and Sidekick 2008, both of which were designed by Microsoft's Danger subsidiary and were precursors to the Kin. T-Mobile is apparently reserving the Sidekick trademark to use for future models, but they won't be compatible with the older models and won't use Microsoft's technology.

Microsoft's decision to kill the Kin was a smart one--the phones were out of sync with the current market. The two Kin models looked like smartphones but weren't--users couldn't add applications. Their original prices were close to smartphones, but without the functionality. To make matters worse, Verizon made buyers sign up for two years of a $30/month data service, the same price that they would have paid for a smartphone. The result was that sales were far below expectations.

Microsoft had originally planned to base the Kin phones on the Danger operating system, then spent 18 months moving them to a Windows CE-based platform. During the 18 months that it took for Microsoft to move from Danger to Windows CE, the smartphone market exploded, thanks to the iPhone and Android. Customer expectations were completely reshaped, and what was acceptable in late 2008 was no longer acceptable in 2010.

Similarly, T-Mobile's decision to kill the Danger-based Sidekick phones makes sense. It was clear that Microsoft was discontinuing any further effort to develop the Danger platform, and the current Sidekicks were getting very old, so it was time for them to abandon Danger and move to another platform.

The question is: Why did Microsoft take the Kin phones to market at all? The company had already announced its Windows Phone 7 platform, and when the Kin phones were launched, Microsoft made it clear that they couldn't be upgraded to Windows Phone 7. I'm sure that Microsoft had to make major financial commitments to Sharp, the manufacturer of the phones, both in NRE costs and in committing to volumes of product for inventory. Microsoft undoubtedly knew what Verizon's service pricing plan was, and should have known how unattractive it would be. It knew the market trends favoring smartphones. As good a decision as killing Kin was, it would have been a far better decision not to launch it in the first place.

And what about Danger? Microsoft spent $500 million purchasing the company in 2008, and now has abandoned both its software and hardware platforms. Microsoft says that some of the social networking concepts from the Kin will be implemented in Windows Phone 7, but it seems like very little return on a big investment.

Microsoft is gearing up for its launch of Windows Phone 7 this Fall, but its mobile operation appears to be in disarray. With Apple and Google piling success on top of success and RIM holding its own, there's virtually no room for Microsoft to make a mistake. They have to do everything right with Windows Phone 7 that they did wrong with Kin to have any chance of success.

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