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Microsoft confirms Kin at least a $240 million write-off

updated 07:00 pm EDT, Thu July 22, 2010

MS confirms Kin cost quarter billion dollars

Microsoft while discussing its spring performance acknowledged that the failure of the Kin phones was one of its most expensive missteps to date. It explained that writing off the project cost $240 million even without the development costs. The ending costs led the Entertainment and Devices group to a $172 million loss despite the success of the Xbox and helped the 23 percent increase in Microsoft's cost of revenue.

Kin has already been considered one of Microsoft's greater blunders as it represented both the internal problems endemic to its current structure and its increasing difficulties translating its clout into successful products. The project was originally intended to use the direct results of the $500 million buyout of Sidekick creator Danger, but a decision to force the use of Windows CE delayed the Kin phones by as much as 18 months and not only left it without third-party apps or a calendar but killed an all-important Verizon rate deal that would have made it competitive. Due to the bandwidth needed by the Kin Studio backup and sharing service, Verizon later insisted the Kin would need at least a $70 smartphone plan, handing sales over to Android, BlackBerry and Palm devices with superior features.

Microsoft also orchestrated an elaborate launch that included a special press event and a broad marketing campaign across TV and other formats. The high profile did little to persuade buyers and saw just 9,705 sales in total. Verizon was disappointed enough with sales that it returned unsold stock after just two weeks rather than try to sell what was left.



By Electronista Staff
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  1. Herod

    Fresh-Faced Recruit

    Joined: Jun 2007

    +13

    Please

    Ballmer, dont go.

  1. Makosuke

    Forum Regular

    Joined: Aug 2001

    +5

    Hard Numbers

    Ahh, I'd been hoping this would come out as part of MS's financial report.

    Even assuming every one of those 9705 registered Kins was a purchase (as opposed to a review unit or one used internally by MS for testing or just employee give-away), that means that each Kin phone cost MS about $24,700 minus the profit from the phone, so even being generous $24K loss per phone sold.

    The particularly hilarious part is that's WITHOUT 18 months of development cost and (I assume) the $500M they spent to buy Danger (did they get anything else out of that acquisition other than an OS and brains they used to produce the Kin? I don't see any Danger carryover in Win Phone 7...).

    Factor in $500M plus however much a hardware/software development team at MS uses up in a year and a half, and the cost of the Kin is probably into the $75-100K range. Definitely, if you assume not all of those 9700 were purchases.

    Calling that a spectacular failure would be an understatement. Couldn't happen to a nicer company.

  1. mustango

    Fresh-Faced Recruit

    Joined: Dec 2008

    +2

    Apple, take note

    Don't let this be you 15 years from now.

  1. Tofino

    Fresh-Faced Recruit

    Joined: Apr 2005

    +6

    Steve Ballmer 2007:

    "...that's gotta be the most expensive phone... ever!"

  1. imactheknife

    Junior Member

    Joined: Jul 2003

    +3

    comment title

    ^ Now isn't that Karma eh? Expensive? and won't sell much! ^

    great quote above me

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