I'm not an expert on Microsoft, but as a designer/developer, I can completely understand what must be going on behind the doors at the company after the Kin was launched (and subsequently killed). Business Insider has a scoop on what the overall feeling within the company looks like.
Imagine working on a project for 3 years. Your talent being used to launch a killer mobile device that is set to make waves in the mobile universe. Only after your hard work ships do you realize that nobody wants it. That's gotta hurt.
Microsoft made the right decision to move the Kin team over to Windows Phone 7 -- but I think it should have been done a couple years ago.
I'm still really excited for Windows Phone 7 though -- and I hope the Kin team members now on WP7 can let the past go, and look forward to delivering on a device that really has potential. The mobile space is an exciting one, and I hope Microsoft is able to deliver. It's going to be tough, as Android and iPhone have already grown into mature operating systems, but with the right people, and a clear vision, it is definitely possible.