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The actual number of units sold isn't nearly as important as how quickly Microsoft decided to cancel the product. Imagine that you are a really rich guy who bought up 100% of Microsoft shares six months ago with the goal of maximizing NPV over a long time horizon. You have a carrier agreement to launch a Microsoft branded phone, but you're pretty sure that the phone you've developed sucks. You have to worry about your relationship with your carrier and customer perception. Two choices are obvious. You can negotiate with the carrier to cancel the agreement. Some sort of exclusive on Windows 7 Phone Edition might sweeten the deal. Consumers will never really know that you'd promised a phone. Or, you can invest in remediation steps to make the phone not suck so badly to save your brand's reputation (or what's left of it).

What Microsoft did makes no sense. Now, I can't trust that Microsoft will support their products for longer than it takes them to get their first screen scratches. And, how could a carrier consider entering into future agreements with Microsoft when this one led to so much public embarrassment? That such a decision was made suggests significant internal managerial distress (to be euphemistic).




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