UPDATE 1-Microsoft CEO bonus curbed for Kin, tablet failures

Fri Oct 1, 2010 1:08am EDT

* CEO Ballmer gets 50 pct of maximum bonus payout

* Faulted for Kin flop, loss of phone share

* Need for new "form factors" to counter iPad

* Despite failings, Ballmer hit "target" bonus

(Adds detail on bonus target)

By Bill Rigby

SEATTLE, Sept 30 (Reuters) - Microsoft Corp (MSFT.O) Chief Executive Steve Ballmer did not get his maximum bonus for the last fiscal year, despite notching the company's highest ever sales, as he took a hit for missteps on phones and not moving fast enough to counter Apple Inc's (AAPL.O) iPad.

Ballmer, 54, recieved a cash bonus of $670,000 for the fiscal year ended June 30, equal to his salary, but only half of the maximum bonus payout, according to a filing with securities regulators on Thursday.

The world's largest software company commended Ballmer for increasing sales 7 percent to a record $62.5 billion, cutting costs, launching the latest versions of Windows and Office, and pushing along cloud computing and gaming efforts.

But a discussion of Ballmer's pay in the company's annual proxy filing also referred to 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."

Microsoft's Kin -- a feature phone aimed at teenagers -- flopped this year and was dropped less than three months after launch with poor sales.

Its Windows mobile phone software has been losing share sharply over the last few years to Apple's iPhone, Google Inc's (GOOG.O) Android and Research in Motion Ltd's RIM.TORIMM.O BlackBerry.

Microsoft is fourth in the U.S. market for smartphone operating systems with a share of less than 12 percent, according to research firm comScore.

SLOW IPAD RESPONSE

The company has also been in the spotlight for the lack of a quick response to Apple's iPad -- a revolution in what the industry calls "form factor" -- which has sold more than 3 million since launching earlier this year.

Ballmer said in July that slates and tablets running Windows would appear as soon as they are ready.

Ballmer's bonus hit the "target award" of 100 percent of his salary, Microsoft's filing said. He was eligible to receive between zero and twice his base salary in bonus.

With his bonus, Ballmer got a total direct pay package of $1.34 million for fiscal 2010, about 6 percent higher than $1.26 million the year before.

Microsoft froze base salaries for its top executives in the last fiscal year due to the uncertain economy.

The company no longer issues stock options for employees, and at his own request, Ballmer gets no stock awards.

He already owns 408 million shares, or 4.75 percent of the company, worth about $10 billion. He is the 16th richest American, according to Forbes magazine. (Editing by Richard Chang and Dhara Ranasinghe)