Motorola Xoom Tablet's $800 Cost: 10 Reasons It's Overpriced

Motorola Xoom Tablet's $800 Cost: 10 Reasons It's Overpriced

Some leaked promotional images from Best Buy of the upcoming and highly anticipated Motorola Xoom tablet indicate that the device will go on sale for $800 when it hits store shelves on Feb. 24. For its part, Motorola hasn't confirmed the rumor, but considering that the chances of the Xoom being quite expensive are high, most believe the $800 price tag is accurate.

If it is, Motorola might have some trouble on its hands. The technology company is undoubtedly popular right now, thanks to its many outstanding smartphones, like the Droid X, but at $800, the Xoom could price itself out of the market. The device is an unknown quantity right now, and consumers might not know for sure if it's worth such a price. The better move for Motorola would be to offer a cheaper Xoom to spur demand for its product.

Read on to find out why:

1. It's only beating the top-of-the-line iPad

Right now, Apple's iPad holds a dominant share of the tablet market. In fact, recent reports suggest the device had over 87 percent market share at the end of the third quarter of 2010. With such dominant share, Motorola must always be concerned about Apple and its tablet. But by pricing the Xoom at $800, it doesn't seem to doing that. Currently, Apple is selling its iPad for as little as $500 and as much as $829. That means that just one of the six iPad models is more expensive than the Xoom. The most comparably equipped iPad is $70 cheaper than the Xoom. That's a problem for Motorola. At $800, it could find its tablet just stalls coming out of the gate.

2. It puts it dangerously close to lightweight PCs

Tablets are made to be mobile companions for consumers and enterprise customers who want to do more while they're on-the-go. That means that tablets must compete with lightweight notebooks. The only problem is, at $800, the Xoom will be in the same ballpark with those mobile PCs. That will result in the tablet competing with both other tablets and lightweight PCs. Being sandwiched between two established product categories is never a good idea, and yet, that's where Motorola finds its Xoom.

3. Apple can get away with it, but not Motorola

Apple can get away with selling a device for $829, simply because it's one of the most recognized and respected companies in the world. But Motorola isn't Apple and chances are, it never will be. Realizing that, Motorola can't come too close to iPad pricing. Offering its Xoom tablet for $800 won't help its cause.

4. The hardware is unproven

On paper, the Motorola Xoom looks to be an outstanding alternative to the iPad. It comes with two cameras, a 10.1-inch display and an appealing design. But it's still unproven. And consumers won't know out of the box if the device will hold up to the same use that the iPad accommodates. Simply put, the Xoom is an absolute unknown to consumers right now. And plunking down $800 for such an unknown might not be something that many customers will want to do.

Xoom Has to Compete with Other Android Devices

5. Consumers don't know if Android 3.0 is worth using

Another issue with the Motorola Xoom is that it's running an operating system that's vastly different from previous versions of Android. The device will be running Android 3.0, which will include an improved user interface, 3D effects and a better browsing experience in Chrome. But customers won't know how well that operating system will actually work until they get their hands on it. Will it be bug-free? At this point, there's no telling. And spending $800 to find out might not appeal to many people.

6. The sweet spot is $600

If Motorola really wants to see its tablet perform well in the next few months, it needs to price the Xoom at $600. At that level, Motorola could beat Apple on pricing. More importantly, it could place the Xoom comfortably between the many Android options expected to hit store shelves this year. Plus, at $600 consumers and even enterprise customers would likely be more willing to take a chance with the Xoom than they would be at $800. The financial impact might not work in Motorola's favor in the beginning at $600, but the tablet market is in its infancy and the mobile company must be thinking about its long-term strategy. A $600 Xoom would fit quite well into that strategy.

7. It gives Apple the opening with the iPad 2

By pricing the Xoom at $800, Motorola is effectively giving Apple the upper-hand that it needs to do what it wants when it wants with the iPad 2. After all, Apple can deliver many of the improvements that the Xoom offers, like dual cameras and an improved operating system, and deliver it at a reduced price than what it's currently selling its original iPad for. If the Xoom were priced more affordably, Apple wouldn't have that luxury, and the pressure it would face would be much greater.

8. Its advantages can be overcome

If Motorola decides to officially announce that it's pricing the Xoom at $800, the company will almost certainly justify the price tag by pointing to the improved operating system, the device's 10.1-inch display, the awards it received at the Consumer Electronics Show in January and much more. It will also draw comparisons to the iPad. But as noted, Apple is in the driver's seat. All it needs to do is deliver an iPad 2 with dual cameras and other improvements, and Motorola has nothing to cling to. The Xoom might be more appealing than the iPad on paper, but will it be able to overcome the improvements Apple will deliver in the iPad 2?

9. Android competitors will be more affordably priced

At the Consumer Electronics Show in January, several companies unveiled Android tablets, including Samsung, LG and Acer. In 2011, the market is expected to be flooded with tablets running Google's Android 3.0 operating system. Because of that, Motorola will find itself competing against those companies as well as Apple. The chances are some of those firms will price their devices lower than Motorola is with its $800 Xoom. If customers realize that they can run the same operating system on a competing tablet that's on sale for $600 or $700, Motorola might have trouble getting customers to choose its tablet.

10. It's a first-run

Motorola has yet to prove itself in the tablet space. The company is a powerhouse in the smartphone market, thanks to the Droid X and Droid 2, but when it comes to competing against the iPad, no one knows if Motorola can compete. That alone should be enough for Motorola to price its Xoom under $800. The company hasn't proved itself yet, and the Xoom is a first-run product. If Motorola cements itself in the tablet space as it did in the smartphone market, then it can worry about getting more for its products. But until then, it needs to do what consumers expect and sell its device at a reasonable price.