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Two Microsoft Corp. Kin phones are shown in San Francisco, Wednesday, May 12, 2010. The Kins are geared toward social networking-obsessed teens and twenty-somethings that want a cool, affordable handset without feeling the need for additional apps like Apple's iPhone offers. (Paul Sakuma/AP)
Two Microsoft Corp. Kin phones are shown in San Francisco, Wednesday, May 12, 2010. The Kins are geared toward social networking-obsessed teens and twenty-somethings that want a cool, affordable handset without feeling the need for additional apps like Apple's iPhone offers. (Paul Sakuma/AP)

The phone wars

Microsoft calling. Anyone there? Add to ...

Microsoft's engineers and executives spent two years creating a new line of smart phones with playful names that sounded like creatures straight out of The Cat in the Hat - Kin One and Kin Two. Stylish designs, an emphasis on flashy social-networking features and an all-out marketing blitz were meant to prove that Microsoft could build the right products at the right time for the finickiest customers - gossiping youngsters with gadget skills.

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But last week, less than two months after the Kins arrived in stores, Microsoft said it would kill the products.

"That's a record-breaking quick end to a product, as far as I am concerned," said Michael Cronan, a designer who helped drive the branding of products like Kindle for Amazon and TiVo. "It did seem like a big mistake on their part."

The Kins' flop adds to a long list of products - from watches to music players - that have plagued Microsoft's consumer division, while its business group has suffered as well through less-than-successful offerings like Windows Vista and Windows for tablet computers.

In particular, the Kin debacle is a reflection of Microsoft's struggle to deliver what the younger generation of technology-obsessed consumers wants. From hand-held products to business software, Microsoft seems behind the times.

Part of its problem may be that its ability to intrigue and attract software developers is also waning, which threatens its ability to steer markets over the long term. When it comes to electronic devices, people writing software have turned their attention to platforms from Apple and Google .

Meanwhile, young technology companies today rely on free, open-source business software rather than Microsoft's products, so young students, soon to be looking for jobs, have embraced open-source software as well.

"Microsoft is totally off the radar of the cool, hip, cutting-edge software developers," said Tim O'Reilly, who publishes a popular line of software development guides. "And they are largely out of the consciousness of your average developer."

The Xbox 360 gaming console and its complementary online services have been a rare hit with consumers. Still, being hip matters only so much for Microsoft, whose profits remain the envy of the business world. Microsoft's software like Windows and Office remain the dominant standard around the world and afford the company an ability to experiment wherever it pleases.

"When you look at the overall numbers and who buys and uses our products, I think our track record is pretty good with all demographics," said Frank X. Shaw, Microsoft's head of communications. "We really do think about serving billions of people and are on a playing field that nobody else in the industry is."

In May, Microsoft announced a shake-up of its consumer and entertainment division with the retirement of the group's head, Robert Bach, and the departure of an important designer, J Allard.

Steven Ballmer, the company's chief executive, now has the heads of the main consumer and entertainment-oriented products reporting directly to him. While Ballmer has been praised for increasing Microsoft's main, old-line businesses, he has come under increasing fire for failing to read changing trends in the market and capitalize on them.



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Nowhere is that more apparent than in Microsoft's come-from-behind strategy in the consumer device market.

In 2008, Microsoft acquired a startup, Danger, that had built popular mobile phone software, hoping that technology would revitalize its waning phone software business. But Microsoft stumbled as it took longer than expected to create a new product with the technology. In April, Microsoft finally introduced the fruits of this labour when it unveiled the Kin phones.

In contrast, Google, a chief Microsoft rival, also bought a mobile technology startup - Android. Both Android and Danger were co-founded by Andy Rubin, who joined Google.

Google has since turned the Android software into the foundation of a fast-growing mobile phone empire with carriers all over the world releasing products that use the technology.

Microsoft, however, has reassigned the Kin development team and put them to work on Windows Phone 7, yet another mobile phone platform, expected later this year. "For developers, mobile is what's hip now, and there are two platforms that matter - Apple and Android," Mr. O'Reilly said.

The list of Microsoft's consumer product slip-ups grows each year. Its line of intelligent watches - come and gone - often ends up as the butt of jokes, as do its tablet PC software products, the poor-selling Windows Vista operating system and the ignored Zune music player. The company also cancelled its Courier tablet PC project shortly after the Apple iPad tablet went into stores.

Microsoft employees were dismayed when they anonymously visited Verizon stores and discovered that employees for the carrier were reluctant to sell the Kin, said a Microsoft executive close to the Kin project. Verizon, the only carrier behind the Kin, tended to promote phones running Google's Android software. "It was killed abruptly because no one was buying it and there no was no credible reason to believe anyone would," this person said.

Fewer than 10,000 Kins were sold.

Mr. O'Reilly said the quick cancellation of the Kin may demonstrate that Microsoft has finally seen the depth of its woes when it comes to attracting consumers and younger audiences.

"This should be seen as a success for them," Mr. O'Reilly said. "They grew fat and happy, but are now waking up to their different competitive position."

Mr. O'Reilly traces part of the problem back to the company's developers. Microsoft spends a great deal of time and money shepherding a vast network of companies and people that base their livelihoods on improving and supporting Microsoft's products. These software developers and technicians have bet their careers on Microsoft and largely benefited from that choice. In addition, they have helped keep Microsoft relevant during the various ups and downs in the technology market.

But the recent crops of computer science graduates and startups have tended to move far afield from Microsoft, Mr. O'Reilly said.

The vast majority of technology startups today rely on open-source software, distributed by Microsoft competitors, for the core parts of their technology infrastructure.

And so the technology-minded people coming out of college have started learning their craft on free software and betting their careers on non-Microsoft wares.

"We did not get access to kids as they were going through college," acknowledged Bob Muglia, the president of Microsoft's business software group, in an interview last year. "And then, when people, particularly younger people, wanted to build a startup, and they were generally under-capitalized, the idea of buying Microsoft software was a really problematic idea for them."

The loss of access to startups has already proved damaging to Microsoft as companies like Facebook and Twitter that rely on free software have grown from fledgling operations to Silicon Valley's latest booming enterprises.

Microsoft has tried to court young developers and young companies. In November, 2008, it created a pair of programs that give students free access to Microsoft's business and developer software. In addition, Microsoft allows some startups to run their operations on its software at no cost over a limited period of time.

About 35,000 startups have been involved in the program since it began, the company said.

"For the most part, Microsoft has been great to work with," said Mark Davis, the chief executive of Virsto, a software startup that received aid from Microsoft. "It's funny to be in Silicon Valley and say that."

Others, however, laugh at the idea that Microsoft requires the startups to meet certain guidelines and jump through hoops to receive software, when its free software competitors simply allow anyone to download products off a website with the click of a button.

"We got introduced to Microsoft through our investors," Mr. Davis said. "They don't do this for just anybody."

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