Motorola Xoom Tablet's Price Will Shoot It in the Foot

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The Motorola Xoom--slated to the be the first Android 3.0 "Honeycomb" tablet to hit the streets--is one of the biggest potential iPad rivals to emerge from CES 2011. Rumors of the Xoom's pricing, though, suggest that the tablet could face an uphill climb to compete with the Apple tablet.

On paper, many of the announced tablets, like the Xoom, seem formidable, and compare nicely to the Apple iPad--or even the rumored features anticipated in the iPad 2. However, price is the big "X" factor when it comes to competing against Apple's established dominance of the nascent tablet market.

There are leaked reports and images suggesting that the Motorola Xoom will launch on February 17 and that it will have a minimum advertised price of $799. At $800, the Xoom would be $300 higher than the entry-level WiFi iPad, and only $30 less than the 64GB 3G model.

When information on Samsung's tablet business model came out, I predicted that the Samsung Galaxy Tab would have trouble competing with the Apple iPad given its pricing, and reliance on a carrier-subsidized wireless contract in order to get it at a reasonable price. While the Galaxy Tab has fared better than other tablet rivals, it has not been any sort of threat to the iPad.

Right or wrong, there is an expectation that Apple devices cost more. People expect to pay more for a Macbook than for a comparable Windows notebook. People expect to pay more for an iPod Touch than for a Zune HD. And, people expect to pay more for an Apple tablet than iPad competitors like the Motorola Xoom.

Granted, there will still be a market for the Motorola tablet. There will always be some who are simply anti-Apple, and others who are simply pro-Android to the point that they overlook price. But, the vast majority of the consumer and business market looking to purchase a tablet will compare the features and functions of the different tablet platforms in order to choose which platform to go with. All else being equal, devices that cost as much or more than the iPad will be at a disadvantage.

It is possible that the Xoom could be offered at a subsidized price through wireless carriers like Verizon. Bringing the initial out-of-pocket expense down with a two-year wireless commitment might snare some additional market, but factoring the total cost over the two years including the contractual obligation to maintain a data plan will still most likely make the iPad appear to be the better value.

The Xoom is formidable against the current iPad, so it might do well out of the gate. But, at $800 I expect Xoom sales to nose dive once the iPad 2 hits the shelves.

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