Motorola Chief Downplays iPad 2 Threat to Xoom

Motorola Mobility CEO Sanjay Jha is underestimating the iPad 2 and overestimating the appeal of the Motorola Xoom at its current price if his presentation at an the Morgan Stanley technology conference is any indication. While Motorola’s first tablet does beat the first-generation iPad in certain specs departments, the device is simply not ready for prime time and overpriced. If Motorola was aiming ahead of the iPad 2, it didn’t do enough.

I bought the original iPad on launch day at my local Apple store. I also purchased the Xoom on Thursday, the first day it was available, from the nearest Verizon store. I’ll be heading back to Apple as soon as the iPad 2 becomes available. I like both the iPad and the Xoom, but Motorola isn’t going to grab any meaningful market-share from Apple if the Xoom is the best it can muster.

I first heard Jha talking about Android when he first introduced the Cliq and MotoBlur at the Mobilize 2009 conference. Motorola’s Droid products have been at the tip of the Android spear since them and he seems pretty confident that Honeycomb can grab as much attention away from the iPad as his Droid devices grabbed from the iPhone.

Let’s take a look at what Jha had to say at the Morgan Stanley conference (Transcript via ZDNET). His words are in quotes and my comments are in plain text:

The product has been on the market now four or five days and I think it’s been a good start I think for sales.

The advertising just started in the late part of last week. You’ll see quite a good series of ads going on in supporting the XOOM product both from ourselves as well as from Verizon.

Verizon and Motorola aren’t sharing sales numbers, but I’ll tell you one thing. I wouldn’t have been able to buy a Xoom after 6pm on launch day if sales were so brisk. The largest Best Buy in San Francisco was out of stock, but the Verizon kiosk at the local mall still had two out of four towards the end of the day. The Best Buy manager I spoke with said that another 11 units would be arriving Monday or Tuesday. That’s pretty low volume for a store of this size. You can’t turn around in the San Francsico without running into a Developer or Android geek. I would’ve expected that population to eat up every Xoom in town.

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The Xoom commercials are fantastic and do a good job of demonstrating the Xoom’s capabilities. My favorite one is above.

Jha continued by talking about the genesis of the Xoom.

How do we come to it? You know, I think you and I were talking, the synthesis of the tablet was that we knew that iPad was launched and we got started building a product, and we felt very early on that we needed to deliver a product which had higher performance.

Games look fantastic on the Xoom and if developers put some energy into THD (Tablet HD) games it will definitely draw the gaming crowd over, assuming the iPad 2 doesn’t have similar capabilities and Android customers actually pay for apps.

But if you ask iPad owners why they enjoy their devices, performance won’t usually be mentioned. Simplicity, ease of use, apps and the gorgeous display are usually mentioned.

And of course at that time when we were doing it, we sort of thought that by the time we deliver a product, shortly thereafter there will be an iPad 2 or some such. So we had to shoot a little bit in front of where we felt the product — the iPad product was and therefore we definitely were shooting for performance.

Apple isn’t standing still and Motorola obviously new that there’d be a second generation iPad. The Xoom is more powerful than the current iPad, but the iPad 2 is an unknown. It will probably be significantly faster than the original iPad, but Apple will likely continue to stress the overall user experience and apps when the iPad 2 is announced tomorrow.

If you look at the iPad today, it’s $729 and 3G modem. We felt with a 4G modem with dual core processor with front camera, back camera, with a gigabyte of memory, with accelerometers, everything, that $799 was important. It was at the right price point for an unsubsidized device.

We definitely want to be able to get value for the products that we deliver. We want to compete and perform, first of all. I think in second half this year, you’ll see prices of tablets come down a little bit from where they are today. But if we cannot compete on performance and associate that performance to our brand name, that would’ve been a problem for us. So we shot for performance coming out of the gate.

First of all, the iPad with 3G costs $629, not $729. But if you ask most consumers what an iPad costs, they’ll quote the WiFi-only price of $499. Any way you cut it, the Xoom costs a premium.  Assuming consumers will pay for performance is a very poor choice. Yes, performance matters if you want to run the most complex games, but not so much for everyday tasks. The masses don’t care about clock speed and cores.

We definitely want to be able to get value for the products that we deliver. We want to compete and perform, first of all. I think in second half this year, you’ll see prices of tablets come down a little bit from where they are today. But if we cannot compete on performance and associate that performance to our brand name, that would’ve been a problem for us. So we shot for performance coming out of the gate.

I think $599 I think is a pretty compelling price. The data plan, as I understand it, is as low $20 per month from Verizon so — and then it goes up.

The other, more important piece of the pricing puzzle is the cost of mobile Internet access. Start off with a $100 or so premium and add up the delta between the AT&T 3G and Verizon wireless service plans and you run into real trouble. The AT&T-equipped iPad costs $629 without a contract and consumers can jump on and off 3G for $15-$25. If you want to buy the Xoom for $599 you’ll need to sign up for a two-year contract that has a total cost of  $480 to $1,200 before taxes and fees, depending on how many GB you need. The cost of the Xoom isn’t in the same league as the iPad and I wish Motorola would stop pretending its price-competitive.

What Should Motorola Do With The Xoom?

Motorola and Verizon need to drop the price of the Xoom to at least be on par with the iPad 2 when it’s announced tomorrow. Motorola also needs to hurry up and release a WiFi only version of the device for $499 or less. More importantly, it needs to move to tie up the loose ends of LTE, Flash and microSD. Those are all features that ar ‘coming soon,’ but I’m paying for now. Flash on the Xoom is a BIG advantage over the Flash-less iPad web browser.

The Motorola Xoom is a nice device, but it doesn’t stand head and shoulders above the iPad as Motorola would like us to think. It’s an excellent device for those of us that live on the bleeding edge and are (somewhat) willing to pay the early adopters’ tax.

You can read the first part of our Motorola Xoom review here.

Comments

  1. Anonymous says

    Really good article – couldn’t agree more. I’m tired of Motorola (after a week, sic) of telling us that the Xoom is such a good deal for the money! Says who? The CEO? Of course he thinks it’s great, but I don’t want to drink that kool-aid! The Xoom is over-priced and that is the major issue with this tablet. The Ipad 2 will be released tomorrow, and chances are the wi-fi version w/ 16 gb could cost $499 as the first generation Ipad is reduced and phased out. Motorola is toast! Jha said sales were off to a “good start”, well, news flash, tomorrow sales go on the decline from here on out. Ipad 2 release, and then soon Toshiba and ASUS will release tablets – if smart, at lower price points – and then the Xoom will go Ka-Boom! Thanks for the hype Motorola – it was great while it lasted, but your pride just killed your chance at any real market share!

  2. Haze says

    I disagree. I’ve had an iPad since Christmas and got a Xoom over the weekend. Sure there are still some features I’m waiting to be enabled on the Xoom… but even as is it is a FAR more competent tablet than my iPad!!!

    Let’s be honest, at most Apple is going to play catch up to the Xoom’s hardware. iOS is not seeing any major changes (at least not from what we know of iOS 4.3)… and this is the area where the iPad really lags behind the Xoom. I know some people enjoy the phone OS simplicity of the iPad, but that was the most disappointing feature in my opinion. I was hoping for something more like a tablet version of Mac OS (and am still hopeful for that). In the meantime, the Xoom offers an experience close to what I imagined out of a Mac OS tablet!!!

    iPad 2 will do well regardless simply b/c it is an Apple product. But if Apple’s past updates are any indication, it will do nothing in terms of improving the technology behind their software (compared to Android’s vision of tablet computing). I expect Apple to remain dominant this year, but you’re deceived if you don’t think that Motorola/Google have eaten into their market share this year.

  3. Jakerocksalot says

    I hope there aren’t too many fandroids looking at the comments because they’ll throw all their apple hate on me after this.
    Motorola’s game plan= see what new innovative and revolutionizing product apple makes, then copy and improve geeky specs that only computer nerds will care about+ add lower price for iPhone/iPad wanna be’s. Oops, the xoom costs more.
    You can’t tell me that apple didn’t start the smartphone market for the average user. If you dont believe me, tell me one phone that made the impact the iPhone did before the iPhone. And there is NO way you can tell me apple didn’t start the real tablet market. And there is NO POSSIBLE way you can say motorola or any company was gonna take the risk of making a tablet before apple showed them the way how.

  4. Haze says

    And stop being such a brand loyalist… to compare the $629 iPad to the Xoom is simply deceitful… that iPad is only 16GB compared to a 32GB Xoom. To get an iPad even close to the Xoom in tech, you have to spend $729, period… and even then of course, the tech is outdated. The pricing of the iPad 2 vs. the amount of evolution in they’re tech will be an interesting balance.

    • Xavier Lanier says

      Not deceitful at all. Jha is talking about entry price points. As I pointed out, entry prices are what this game is all about and all consumers seem to remember. I think Apple will add more memory to the iPad 2 anyways.

      • Xavier Lanier says

        Storage capacity is just one tiny piece of the puzzle. Not biased at all – I like both devices. The reality is that the Xoom is more expensive however you measure it.

  5. MotoMessedUp says

    “…if you ask most consumers what an iPad costs, they’ll quote the WiFi-only price of $499″. EXACTLY CORRECT! I’m really sick of the xoom fanboys quoting the equal pricing between the xoom and the ipad using the fully loaded version of the ipad. Its simply not true. First of all you cant compare pricing between the xoom and the one year old ipad, thats just stupid. Lets see what the ipad2 has to offer at the lower price point and compare that against the xoom. Furthermore the majority of ipad owners bought the wi-fi only version because in most college campuses, office buildings, and hospitals there is wi-fi access so why would I pay a premium for 3G/4G access hardware that the average user doesn’t need? Wake up Motorola, Most people are already paying for 2 data plans already one for their home internet and one for their phone, no-ones lining up to get a third data plan! If thats the target consumer that the xoom is shooting for than good luck with your niche product, the ipad2 sales will blow you out of the water. Oh, wait… The fanboys are telling me there’s a wifi only xoom thats alot cheaper. Really? Where is it? Perhaps its sitting in the Motorola factory along with the flash capability of the xoom.

    • Guest says

      Keep in mind “fully loaded” is the only iPad comparable to Xoom. I agree the iPad 2 is the better comparison, but when you do compare it, compare the same 3G, 32GB models.

  6. Sali312 says

    Soon apple will be down to 5 -10% in the smartphone market and 5-10% in the tablet market. The sheer number of Andriod devices will force the prices down as they did with the phones. Apple will never be able to compete but they will always have their fanbois. I have an iphone but which idiot would buy an ipad when it has no real multi tasking on it…thats just plain dumb

    • Guest says

      Agreed… But the thing is, the one that’s actually gonna stop that from happening are the greedy CEO’s like JHA! Come on.. Who is he kidding?? Look, if you’re trying to lure the customers from your competitors, you have to consider a much lower price first! Instead, after getting rave reviews from his upcoming Xoom, he decided a lot of people will buy it and he’ll rack up all those cash much faster just cause he doubled his profits! Stupid, stupid, stupid!! Android will fail to catch up with iOS if the mobile CEO’s becomes too greedy.. Simple arithmetic 1M units sold with $100 profit per unit is = $100M profit.. 10K units sold with $300 profit per unit = $3M.. Smarten up JHA!!!

  7. Givenzgang says

    Yes, it’s always good business to “downplay” Apple’s impact on the market. Just ask Steve Ballmer and his “iPhone killer,” the…. um…. what’s it called again?

  8. Chris says

    Got my Xoom. Love it. iPad 1 gone, never going to get an iPad 2. Sorry Steve, but I don’t want a tablet to play instruments, record my own songs, or film movies. Your presentation yesterday didn’t address anything but fluff about price (for a lesser product) and junk I won’t use. The top selling point of the event was that cool cover…that’s sad.

  9. HomerSimson says

    The major issue with pads right now is the price. You can get a way more powerful laptop with more functionality for half the price of one of these. New form factor != twice the price. When they get below $300 I’ll buy. I refuse to pay fad pricing.

  10. Anonymous says

    You guys just don’t get it. Apple doesn’t care about Android Fanboys. They don’t give a rats ass about you guys. They are targeting the masses! They are doing a damn good job at it.

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