Microsoft's Ballmer Takes Financial Hit on Kin, Windows Mobile

Microsoft CEO Steve Ballmer saw his fiscal 2010 compensation take a hit due to the failure of the Kin phones and his company's continued market-share slide in smartphones.

Microsoft CEO Steve Ballmer may be feeling some personal pain from his company's recent debacles in the mobile arena: according to Microsoft's 2010 Proxy Statement, the failure of the Kin phone-combined with Microsoft's eroding smartphone market share-prevented Ballmer from receiving his full potential compensation for the year.

Not that Ballmer will be looking for an overpass to sleep under anytime soon: The chief executive's pay package totaled $1.34 million. That includes a $670,000 base salary and $670,000 in "cash incentive payments." Interestingly, that lagged behind the packages for other Microsoft executives, including Chief Financial Officer Peter Klein and departed Business Division President Stephen Elop.

Ballmer received nearly identical compensation for both fiscal 2010 and 2008. In 2009, when a collapsing economy forced down Microsoft's revenues and profits, he made $1.26 million.

But 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."

In awarding Ballmer 100 percent of his base salary, the board apparently considered Ballmer's "disciplined expense management," the successful launch of products such as Windows 7 and Office 2010 and progress in cloud initiatives such as Azure and Office Web Apps. However, it also weighed some negative factors: "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 and 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."

Speculation currently abounds that Microsoft will host a high-profile launch for Windows Phone 7 in New York City on Oct. 11. The company is indeed hosting its annual Open House on that date, in addition to a party that could double as a Windows Phone 7 "launch." The Open House will almost certainly include devices running the smartphone platform, in addition to other holiday products such as Xbox Kinect.

Microsoft is making a considerable bet that Windows Phone 7 will reverse the company's mobile market-share slide. Outside analysts have estimated the marketing costs of the initial rollout as close to $400 million, in addition to various development expenses. With that sort of massive expenditure, Microsoft can only hope that Windows Phone 7's unique user interface-which aggregates Web content and apps into subject-specific "Hubs"-will sway buyers away from the Apple iPhone or Google Android devices.

Reports indicate that AT&T will be the "initial exclusive carrier" for Windows Phone 7, releasing three devices manufactured by HTC, Samsung and LG Electronics. Verizon-carried devices are expected in 2011.