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Dead Pink phone fallout hits Microsoft's top brass

F**KIN hell

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If killing the KIN after just two months was bad for Microsoft, what happened next is far worse – especially for its corporate captains.

This single act has blown the lid off what appears to be smoldering frustrations inside the consumer products group and divisions between that group and the rest of the company.

Allegations have been flying of autocratic leadership, incompetence, ignorance of what it takes to build consumer products, and an uninvolved and indifferent senior management. These have mingled with demands that heads must roll in the wake of KIN's death.

The shouts and claims have been posted on the Mini Microsoft blog, a notoriously reliable source of insider information from anonymous company insiders.

Many senior Microsoft names have been implicated. From those involved directly in building and managing the KIN and Microsoft's phones business – from Roz Ho, Terry Myerson and their boss Andy Lees all the way up to chief software architect and Bill Gates' replacement Ray Ozzie – accused of being too concerned with vision setting and irrelevant projects and less interested in actually making things work.

Also in the firing line: Microsoft General Manager Matthew Bencke, who boasts on his LinkedIn page that he drove Microsoft's 2008 acquisition of then-sexy mobile software and services company Danger, which had collaborated with Sharp on the teen-friendly Sidekick.

It seems from Mini Microsoft that the former Danger staff are finally speaking their minds, having suffered in silence and watched aghast as their ideas were rejected and Microsoft trimmed features and re-calibrated the Pink/KIN's project to meet inexplicably changing goals.

This is the most telling comment from a blog that reads like a description of ongoing train wreck:

The remaining Danger team was not professional nor did we show off the amazing stuff we had that made Danger such a great place. But the reason for that was our collective disbelief that we were working in such a screwed up place. Yes, we took long lunches and we sat in conference rooms and went on coffee breaks and the conversations always went something like this..."Can you believe that want us to do this?" Or "Did you hear that IM was cut, YouTube was cut? The App store was cut?" "Can you believe how mismanaged this place is?" "Why is this place to dysfunctional??

It continues:

We all knew (Microsoft employees included) that is was a lackluster device, lacked the features the market wanted and was buggy with performance problems on top of it all. When we were first acquired, we were not taking long lunches and coffee breaks. We were committed to help this Pink project out and show our stuff. But when our best ideas were knocked down over and over and it began to dawn on us that we were not going to have any real affect on the product, we gave up. We began counting down to the 2 year point so we could get our retention bonuses and get out.

Some have attempted to mitigate the failure of KIN. While some reports claim just 500 KINs were sold, others have claimed the number is more than 8,000. But how many phones are in circulation is irrelevant: the phone was killed after just six weeks, having cost Microsoft "billions".

The real issue is deeper. The Microsoft insider's comment indicates that the Danger team have been scapegoated and that they were marginalized until they became disaffected.

What this reveals is a classic case of M&A failure, where the acquirer has failed to integrate either the technology or the people from the company that it bought – ie the stuff that made the acquisition desirable in the first place.

Second, it demonstrates a dangerously blinkered culture inside a company that prides itself on harnessing the best in new thinking and funneling ideas into innovative products. It shows that dissenting and alternative views are not welcome and nobody is wiling to take responsibly for stopping the speeding train.

The timing for all this couldn't be worse for Microsoft. Next week, chief executive Steve Ballmer and chief operating officer Kevin Turner will go before partners to convince them that Microsoft is on the right track and that they should buy more Microsoft products and services.

Later this month, the duo face a harder audience: Wall Street types at Microsoft's annual Financial Analyst Meeting on its Redmond, Washington campus.

Analysts have been waiting for more than two years for Microsoft's answer to the iPhone. Now, they'll want to know what Microsoft's got against Android. Investors will want to know if Microsoft's stock is poised for growth and if the company is in safe hands under Ballmer and Turner.

Last year's FAM was bad enough for the pair as Microsoft had to contend with lost mobile market share. Twelve months on, Microsoft is grappling with a failed mobile phone while mushrooming dissent indicates a dysfunctional management system in a crucial and high-growth market.

Investors will want to see results, and if not results, then some kind of action. What they won't want to hear are more promises of future glory as happened at FAM last year. ®

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