Mobile Misfires Haunt Microsoft

By Nicholas Kolakowski  |  Posted 2010-10-03 Print this article Print


Microsoft's previous misfires in the mobile arena have come back to haunt the company's executives in more ways than one. According to the company's 2010 Proxy Statement, the demise of its Kin phone earlier this year-on top of that eroding smartphone market share-prevented Microsoft CEO Steve Ballmer from receiving his full potential compensation for the year.    

Ballmer's compensation for fiscal 2010 could have potentially been $2.01 million, with a "potential Incentive Plan award of up to 200 percent of his base salary for the fiscal year." But the total award eventually came to 100 percent of his base salary, or $670,000, after the board weighed the company's recent successes-the Windows 7 launch and progress in cloud initiatives such as Azure and Office Web Apps-against a handful of fiascos: "the unsuccessful launch of the Kin phone; loss of market share in the company's mobile phone business; and the need for the Company to pursue innovations to take advantage of new form factors." 

The proxy document also called Robbie Bach, the retiring president of Microsoft's Entertainment & Devices Division, to task for the company's underperforming mobile initiatives: "The strong financial performance [of Bach's division] was offset by disappointing performance in the Windows Mobile portion of the business, where the company lost share and continued to have operating losses yet made strategic progress toward the fall 2010 launch of the Windows Phone 7."

The working theory is that Windows Phone 7 will launch sometime in mid-October. Microsoft is hosting its annual Open House in New York City Oct. 11, as well as a party that could double as a smartphone launch event. At least one analyst has estimated Windows Phone 7's rollout-related marketing costs at roughly $400 million-before you factor in expenses related to platform development.

The first Windows Phone 7 smartphones will reportedly launch through AT&T in early November, with three devices manufactured by HTC, Samsung and LG Electronics. Samsung officially announced Sept. 30 that it is producing Windows Phone 7 devices, but declined to specify an exact number or release schedule.

Even as Microsoft prepares to face off against Google and Apple, though, those rivals-along with a handful of other tech giants-decided this week to help Redmond in its long-running patent-infringement battle against Canadian firm i4i. In nine "friend of the court" briefs filed with the U.S. Supreme Court, those companies-along with entities such as the Electronic Frontier Foundation and SIFMA (Securities Industry and Financial Markets Association)-have joined in arguing that the standard for invalidating patents should be lowered.

Under the current terms of the U.S. Patent Act, the burden of "establishing the invalidity of a patent" rests with "the party [that is] asserting such invalidity." In addition, the party must provide "clear and convincing" evidence about that invalidity. Microsoft hopes that, if the court lowers that standard, it will give the company a legal advantage against i4i, which has won several lower-court rulings.

Those rulings found that Microsoft Word 2003 and 2007 violate i4i's patents for custom XML. An in-depth breakdown of i4i's patent by eWEEK can be found here. In April, a federal appeals court rejected Microsoft's request for a multiple-judge review of the lawsuit, which resulted in a nearly $300 million judgment.

Microsoft's latest petition is Microsoft Corp. v. I4I Limited Partnership, 10-290, U.S. Supreme Court (Washington).

Nicholas Kolakowski is a staff editor at eWEEK, covering Microsoft and other companies in the enterprise space, as well as evolving technology such as tablet PCs. His work has appeared in The Washington Post, Playboy, WebMD, AARP the Magazine, AutoWeek, Washington City Paper, Trader Monthly, and Private Air. He lives in Brooklyn, New York.

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