KIN Total Cost Nears One Billion Dollars

[Ed Hansberry]

<div class='os_post_top_link'><a href='http://www.engadget.com/2010/07/22/kin-listed-as-at-least-240-million-writeoff-in-microsoft-earnin/' target='_blank'>http://www.engadget.com/2010/07/22/...crosoft-earnin/</a><br /><br /></div><p>So just how much did the whole Danger acquistion and KIN project cost Microsoft? It looks like the total cost is approaching $1,000,000,000. Ouch. Engadged discovered there was a $240 million writeoff in Microsoft's June 30, 2010 financial statements and notes that it paid $500 million for Danger. What is not included in any of these numbers are:</p><ul><li>Routine operation expenses Microsoft incurred for the unit since the Danger acquistion.</li><li>Hardware upgrades and purchases for the Sidekick infrastructure</li><li>Revenues from the Sidekick business (that would offset any costs)</li><li>Expenses, penalties and fees incurred when the Danger servers went belly up and ate all of the Sidekick data and Microsoft had to go in and fix it</li><li>Marketing costs for the KIN</li></ul><p>All told, I suspect the venture wound up costing Microsoft over a billion dollars above any revenue it got from the Sidekick business. A billion dollars is a lot of money, but in the world of acquisitions, I suspect more money was blown when HP acquired Compaq or AOL acquired Time Warner.</p>

[Fritzly]

Not to metion the damage to the image of MS...... which is grealy costlier...........

[Ed Hansberry]

Not to metion the damage to the image of MS...... which is grealy costlier...........

Nah. The KIN fiasco is known only to tech geeks. Few Joe Consumers ever heard of it.

Vista, now *that* damaged the image of MS.

[vangrieg]

What it also doesn't include is intellectual property, code, infrastructure, patents, consumer research data etc., that can be used for the benefit of WP7. How much that's worth I have no idea.

Also, for examples of money thrown away you don't need to go as far back in history as HP/Compaq. The recent acquisition of Palm by HP will be a much deeper money dump.

[Fritzly]

What it also doesn't include is intellectual property, code, infrastructure, patents, consumer research data etc., that can be used for the benefit of WP7. How much that's worth I have no idea.

Also, for examples of money thrown away you don't need to go as far back in history as HP/Compaq. The recent acquisition of Palm by HP will be a much deeper money dump.

Why? It seems that HP is going to use Palm OS and IP; MS did not with the Sidekick....

[randalllewis]

Nah. The KIN fiasco is known only to tech geeks. Few Joe Consumers ever heard of it.

Vista, now *that* damaged the image of MS.


I agree Vista (in its early days) hurt Microsoft's rep, but what hurt them far more was Microsoft's silence while Apple defined Vista over and over again in the PC/Mac ads. Tech issues aside, a prime rule of marketing is never, ever let someone else define your product.

[vangrieg]

Why? It seems that HP is going to use Palm OS and IP; MS did not with the Sidekick....

What makes you think MS won't use whatever IP Danger had and was developed later?

HP is going to use Palm OS probably, but it's not worth 1.2 billion. Not anywhere near that number.

[Ed Hansberry]

What makes you think MS won't use whatever IP Danger had and was developed later?
I think the MyPhone site is based on Danger technology. I'd like to see some of the KIN Studio features make it to WP7, but I suspect those two technologies fall somewhere in the $999,999,500,000 range below $1B. ;)

[Fritzly]

What makes you think MS won't use whatever IP Danger had and was developed later?

HP is going to use Palm OS probably, but it's not worth 1.2 billion. Not anywhere near that number.

The fact that the Kin was built from scratch and not using those technologies.

We are all entitled to our opinion so I respect your analysis of the Palm deal; said that it is also worth to note that it is impossible and incorrect to establish an absolute value for assets like IP: Palm IP could be worth almost nothing to John Deere and extremely valuable for HP, Lenovo etc.; the latter being able to fully explit the potential of the IP. If MS spent almost a billion for the Kin, how much could be worth a scalable OS that could be used on phones, "slate" computers etc.?

[vangrieg]

Why are you saying it was built from scratch? Danger's software was the most interesting on the server side as that's where the action was for Sidekick.

How much that's worth I have no idea, as I acknowledged earlier.

Also, you are absolutely right in saying that IP is worth different money to different companies. That's why I think 1.2B for Palm acquisition is a waste of money in HP's case (not that it's a reasonable price for anyone, but HP in particular is not the company that could take it from there for numerous reasons, internal and external to HP). 1.2B is of course not the final cost because the business is bleeding enormous amounts of money and will keep doing so for the nearest years (two in the most optimistic scenario I'd say).

[Fritzly]

Why are you saying it was built from scratch? Danger's software was the most interesting on the server side as that's where the action was for Sidekick.

How much that's worth I have no idea, as I acknowledged earlier.

Also, you are absolutely right in saying that IP is worth different money to different companies. That's why I think 1.2B for Palm acquisition is a waste of money in HP's case (not that it's a reasonable price for anyone, but HP in particular is not the company that could take it from there for numerous reasons, internal and external to HP). 1.2B is of course not the final cost because the business is bleeding enormous amounts of money and will keep doing so for the nearest years (two in the most optimistic scenario I'd say).

The fact that it was re-built from scratch was stated by MS reps in different occasions. Note that I am not against the idea itself: using technology already and widely used as foundation in other products makes absolute sense and in spite of the higher upfront costs can bring huge scale economies in the mid, long terms.

As for HP again it is extremely difficult to determine what company A is worth for company B also because only the top management of the latter know what are the plans behind the acquisition.

Was Yahoo worth 50 billions for MS? Opinions differ.......