iPad 2 Pricing Will Force Xoom Price Cut

By Clint Boulton  |  Posted 2011-03-05

iPad 2 Pricing Will Force Xoom Price Cut

Apple's iPad 2 has a few features in common with Motorola's Xoom Android 3.0 "Honeycomb" tablet, including a dual-core processor and dual cameras.

Of course, the iPad 2 is also slimmer and weighs less than the Xoom, but these may be mere trifles for consumers next to the price difference. Apple retained the same pricing scheme for its second-generation tablet as did for its first.

Accordingly, if Motorola and Verizon Wireless execs have any cause for concern, it's in the pricing, which threatens to undercut their Xoom sales. Verizon is offering the Xoom for $599 with a two-year deal, or $799 without a contract.

The $799 price tag is $70 more than a comparable 32GB iPad with WiFi+3G. Here's the kicker though: Motorola and Verizon executives could rightfully argue that the price difference was more than worth it over the first iPad because the Xoom boasted dual cameras and a dual-core processor, and is upgradeable to Verizon's 4G LTE (Long-Term Evolution) network.

The iPad 2 neutralized nearly every premium Xoom feature but the 4G network capability-which, while free, will be a hassle to upgrade to this spring.

So what are Motorola and Verizon to do? Naturally, they could slash the Xoom price point to make it more enticing for consumers. When asked whether Verizon would slash the Xoom cost, a Verizon spokesperson told eWEEK: "We don't discuss pricing or pricing strategies."

Fair enough. eWEEK is guessing the Xoom could drop to $499 on contract and $699 without. Analysts unilaterally agree the partners in Android will have to cut the costs.

"Will the Xoom come down in price eventually? Sure. But I wouldn't think it would drop as an immediate competitive response to the iPad 2, because the iPad 2 is priced identically to the original iPad," Current Analysis analyst Avi Greengart told eWEEK. "It's not like Motorola didn't know it was coming." 

Industry analyst Jack Gold, who was underwhelmed by the iPad 2, told eWEEK the Xoom price will come down once the companies scale up production and the "early adopters" are taken care of. "And you'll also see lower-cost versions of the Xoom out soon-perhaps by CTIA [scheduled for the last week of March]."

Analysts Ready for Xoom Price Cut

However, Forrester Research analyst Sarah Rotman Epps, who has repeatedly gone on record saying the Xoom price point was too high from the start, said it's going to be tough for Motorola, given the component costs, "but it would make the Xoom more competitive with iPad 2."

Know what else would make the Xoom more competitive to the iPad 2? More applications. Apple CEO Steve Jobs gleefully pointed out at the iPad 2 launch that there are 100 Honeycomb applications, compared with 65,000 for the iPad.

Gartner analyst Van Baker believes that Apple's whole package with the iPad 2 is simply more attractive to consumers than the Xoom.

"Android is way behind Apple in the application space," Baker told eWEEK. "If you are comparing OS features, then the gap is not as significant, but consumers are not going to buy a tablet based on which OS it has."

Baker also argued that, by pairing the Xoom with a 3G contract, Motorola and Verizon are approaching the U.S. market the wrong way.

"The assumption by Motorola is that everyone wants to have 3G connectivity. In the U.S., that has not proven to be true. The percentage of tablet users that are actually subscribing to data plans is relatively low as evidenced by the iPad shipments versus the data plan signups that AT&T reported for the device in the last quarter of 2010. If you are happy with WiFi, the iPad is much less expensive, and most people are using the device where WiFi is readily available, such as a living room, classroom, coffee shop, etc."

It's unlikely Motorola will go long without a WiFi-only Xoom. Moreover, the Xoom won't cost $799 off contract for long. Carriers cut their prices for the Samsung Galaxy Tab when it didn't sell.

And now Samsung has said it will reconsider the design and cost of its Honeycomb-based Galaxy Tab 10.1, citing Apple's iPad 2 pricing.

Moreover, the market hasn't even seen the RIM PlayBook or HP TouchPad ship, so it will be interesting to see how those vendors price their tablets. Entering the tablet market and going up against the iPad-and now the iPad 2-is not an enviable exercise.



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