Motorola’s pricing strategy

February 8, 2011 § 1 Comment

A few weeks ago, Motorola had on its hands, two certifiably hyped up and much wanted devices- the Atrix 4G superphone launching on AT&T and the Xoom tablet launching on Verizon. What was known was that the devices had some of the best technical specs in their respective fledgling categories and also boasted the Motorola stamp of quality- one that has good street cred with the success of the Droid platform. Also in tow was their excellent experience in crafting cool Android products. In all, a win-win. Coinciding with the split of the company and the launch of Motorola Mobility (NASDAQ: MMI), this was to be a rebirth of the iconic Motorola brand with a new identity.

What has followed is a very puzzling pricing strategy that threatens to kill all the buzz surrounding these products (if the Internet forums are to be believed). The Atrix was supposed to be ATT and Motorola’s champion against iPhone on Verizon. And from a product stand point, it still is. But from a cost standpoint, it has the possibility of falling short of its lofty goals. The phone has been priced at $199 on a 2 year contract but the Atrix accessories which include a cool laptop dock and an entertainment dock have both been priced significantly out of a normal person’s reach.  The dock costs $300 when bought along with the phone (total $500) and $500 if bought separately. To note, a brand new iPad costs $500 in comparison. The entertainment dock comes with a wireless keyboard and a mouse for $200. Full pricing details are available here. To me, it seems like the pricing does not reflect that of its competition and does not capitalize on the uniqueness of its accessories. If there is a hidden secret sauce here, I am missing it. The Atrix looks like one of the coolest devices to be launched this year, one I was seriously considering upgrading to. At this price point, I am not sure if I can afford it.

The Xoom tablet was officially launched to the American public with a Superbowl ad that reminded us of the iconic Apple 1984 ad, just that Apple was “The Man” this time around. Earlier in the month, Google and Motorola had previewed the tablet and the new Android Honeycomb OS that will power it. People (and yours truly) were really excited for the tablet. It looked and played cool. And then came the hammer that the Xoom would cost $800. Yep, the first genuine iPad competitor (ignoring the Samsung Galaxy tab which was running an Android version designed for smartphones)  will cost almost twice as much. Yes, I agree that the $800 Xoom has inbuilt 3G which the $499 iPad does not. But people tend to compare apples to oranges all the time. And the barrier of entry is much higher for the Xoom than the iPad. In addition, the VZ data plans for tablets are pretty expensive (not that any tablet 3G plan is cheap). All in all, the Xoom is going to have a tough time matching the iPad sales numbers which is a pity considering that it looks and feels like a fantastic product- comparable if not better than the iPad.

I am no business executive or finance maven but in my humble opinion, Motorola should have launched a WiFi only SKU comparable in price to the iPad. The WAN version should have been priced closer to the iPad 3G price ($630) although Apple has immense pricing flexibility due to their purchase volumes ( I should someday write a post on Apple’s excellent supply chain management). The Atrix accessories should have been much cheaper. If you think the laptop dock to be really a screen with a connector and 15 inch LCD screens costing less than $80 in the market (cheaper with more volume) pricing it at $300 or worse still $500 puts it out of the reach of very many people. Until this changes, Motorola has lost a surefire customer in me for the Atrix and a possible customer for the Xoom.

I didn’t think there would be a day where the “premium” Apple products are also the most affordable ones in their segment. To be clear, I am not blaming Motorola for all this. It is probably a mixture of costs, strategy and also carrier constraints which are driving the pricing but it is something that is worth a revisit. For my sake if not anyone else 😦

Update: To validate the barrier for entry point, HP/Palm just announced the TouchPad tablet with webOS and the first model to ship will be Wi-Fi only. Well played HP/Palm. Very smart business move. More on the TouchPad here and here. I will write a separate blog post on this topic soon.

iOS vs. Android, part II.

January 13, 2011 § 1 Comment

Daggers drawn, here we go again. With the recent and totally “unexpected and surprise” announcement that the iPhone is heading the Big Red way, we now have a battle on our hands. Until recently, the battle between the two operating systems was fought as a proxy war between the two largest carriers, Verizon and AT&T. With the iPhone now soon to be available on both networks, it makes things a tad fuzzy. Added to the mix is the fact that some of the upcoming Android big hitters are also headed the AT&T way. Until the iPhone exclusivity existed, AT&T either chose or was forced to pick up second grade Androids. That has been changing the last few months and will become obvious with the upcoming Motorola Atrix, Samsung 4G Android devices, Sony Ericsson Xperia Arc and more. On a smaller note, AT&T is also courting Microsoft by being the premier launch partner for Windows Phone 7 devices and also RIM with the exclusive Torch.

The coming months will hopefully provide answer for the following questions:

1. Was Android’s rise only due to lack of iPhone on Verizon?

2. Is AT&T doomed, now that it has the “perceived” poorer network and the iPhone is no longer exclusive?

3. With the blog world taking sides [1][2][3], are things only going to get murkier?

4. Will Verizon stop or significantly reduce its An”droid” ads?

5. Is the Google-Verizon honeymoon over?

6. What happens to Motorola now that the big ad dollars are probably not there from Verizon?

We are all set for an interesting 2011 on the mobile OS wars. Get ready folks. Its going to be one heck of a battle between the behemoths!

SIM, microSIM and more

October 28, 2010 § Leave a comment

A Subscriber Identity Module (SIM) does a lot of cool things it doesn’t get credit for. It allows you to actually connect to a network, make calls, download music, browse, chat…and lots of other stuff. I will refrain from going into details and let Wikipedia do the honors. All phones that use the GSM/GPRS/EDGE/WCDMA/HSPA technologies use the SIM to do all the cool stuff. One of the best things about the SIM is that it is removable and replaceable with another from a different carrier, thus allowing a user to travel the world and not necessarily pay exorbitant roaming charges. Much of Europe and Asia uses the kind of networks that require handsets to use a SIM card and hence makes it easy for people to invest on a cool phone and use prepaid SIM cards wherever they go.

Now Apple, being the pioneer it is, wanted to curb the rampant jail-breaking and use of the iPhone without Apple getting its dues, one way or the other. It was only a natural approach to protect what is probably the most profitable single product of the decade. Thus entered a sibling of the SIM with the iPhone 4 (and subsequently the iPad), the microSIM. To be clear, the microSIM is an ETSI ratified and designed entity but didn’t attain legitimacy of use with mobile phone manufacturers until it was embraced by the iPhone 4. There are a lot of hacks to circumvent the iPhone 4 microSIM issue

And to kick it up a notch, there are rumors floating around that a popular SIM manufacturer Gemalto and Apple are collaborating on a new kind of SIM. This is supposed to be embedded entity taking away the need or means to swap SIMs. Apple and Apple alone would control the  carrier the device can connect to and make it well, interesting for hackers and jail-breakers. For now, this report is only a rumor but if it were to be true (gigaOM is fairly well reputed and doesn’t make stories up for the sake of traffic) it would give the industry a new way of locking a customer up and make it harder to jail-break the handsets.

As a parting note, it is interesting to see how much the mobile phone industry has been and is being revolutionized by the good people at Cupertino. Regardless of the implications to customers and carriers, they surely have made their mark in just 3 years of being in the mobile phone business.

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