It seems that after doing some initial work on these phones based around Danger's proprietary Sidekick OS, Andy Lees -- the SVP of Microsoft's mobile division -- instructed everyone to go back to the drawing board and rebuild the OS based on Windows CE. It appears the company didn't want a project that wasn't directly connected to its Windows kernel. This move allegedly set the release of the devices back 18 months, during which time Redmond's carrier partner became increasingly frustrated with the delays. Apparently when it came time to actually bring the Kins to market, Big Red had soured on the deal altogether and was no longer planning to offer the bargain-basement pricing deals it first had tendered. The rest, as they say, is history -- though we don't think even great prices could have accounted for what was fundamentally a flawed product. Our source says that the fallout from this troubled partnership is that Microsoft has backed away from Verizon as a Windows Phone 7 launch partner, claiming that the first handsets you see won't be offered on the CDMA carrier -- rather that we should expect GSM partners to get first crack.

But wait, there's more -- the Kin team is being refocused onto the WP7 project, but that's not the only shakeup going on. Our source said there had been rumblings that Steven Sinofsky -- president of the Windows and Windows Live groups -- is making a play for the entire mobile division as well in an attempt to bring a unified, Windows-centric product line to market. If these rumors are true, the push inside the company could move to align all forthcoming projects with an overarching strategy that leads back to the introduction of a much more cloud- and mobile-centered Windows 8 release. This goes directly against what we heard reps preach at both WMC and MIX10 this year, where the mantra was "the phone is not a PC." If things go according to this plan, like Ballmer said at D8, "They're all PCs." Of course, these are big gestures which would cause major waves -- nothing has happened just yet.

If you're looking for a clear picture in all this, what the basic takeaway seems to be is that the company is in a serious state of flux right now. The departure of J. Allard and Robbie Bach, the death of the Courier project, and now this Kin debacle all seem to be clear signs that rapid and surprising changes are afoot. Hopefully Windows Phone 7 will power through this mess and deliver on the promises made earlier in the year -- we know that the company is capable of great things, but an atmosphere of infighting and confusion typically doesn't lead to amazing products. We've got our fingers crossed that Microsoft beats the odds.

Update: Our source says the Sinofsky moves may not be as cut and dry as originally communicated, and we've edited the above text with a caveat.