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.

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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.

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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.

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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.

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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.