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.

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Tablet wars

May 12, 2010 § 1 Comment

The iPad is about to have some serious competition. In the marketplace today, the iPad is numero uno when it comes to a must have tablet computer. That might soon change if Google, HP, Lenovo and a myriad of competitors have their way. It is public knowledge that Google is working on a tablet that runs one of its Chromium/Android OS. This much was revealed a few weeks back here. There is even a cool video with a mockup of a tablet running the OS. Fast forward to today where there is tremendous anticipation for an iPhone that runs on Verizon. For everyone complaining about ATT’s network being an impediment to using the iPhone, this was going to be the Holy Grail. Engadget dug up the ATT-iPhone contract details that confirmed that the exclusivity expired not in 2010 as many had predicted but in 2012. This implied that Verizon would have to wait to get the iPhone.

In the meantime, the Verizon – Google partnership on the Droid handsets is flourishing. All the Android devices on Verizon are selling extremely well and are proving to be a cash cow to Verizon. All of a sudden, for haters of ATT network, there is a lot of smartphone love with The Big Red. So it was no surprise when WSJ and Bloomberg leaked information yesterday of a collaboration between Verizon and Google to bring the Google tablet on their network. This makes sense in a lot of ways. Google gets to continue its oneupmanship battle with Apple. Verizon gets to call a tablet its own and the consumer has choice in the tablet segment.TechCrunch breaks this equation down here.

Eventually HP will get into the tablet business with a webOS based Hurricane tablet. Microsoft is already in the tablet business to retain its competitive edge in the OS segment. So a bevy of vendors will tote out Win7 tablets in the coming months. The Lenovo U1 IdeaPad met with good initial response when unveiled at CES. It remains to be seen if it ends up as a meaningful competitor. The iPad will now have to fight it out with multiple tablets featuring different OS’s each with its pros and cons. It will also have to keep upping the ante on the e-Reader front against the Kindle, Nook and the upcoming Kobo from Borders.

For the consumer, it is a win-win. Competition as always forces innovation and price wars. It also means there is an alternative. Bring on the tablets!

Whatever is going on with Palm

April 18, 2010 § Leave a comment

Since its announcement on Jan 8, 2009, the Palm webOS mobile operating system has garnered quite a bit of attention in the mobile world and why not. Being the pioneer in the PDA segment with the original Palm Pilot, Palm’s fortunes had dwindled in recent years. The webOS was destined to be the knight in shining armor for a once beacon and now wounded warrior in the industry. Early reviews of the Palm Pre were generally positive and those of the webOS were extremely positive. But the simultaneous assault of the tremendously popular iPhone OS and the rapidly growing Android ecosystem not to mention the millions of Crackberry faithful, has put the future of the promising webOS in question.

The last few months have seen the stock plummet (chart) and some high profile executive changes. With disappointing 2Q results, there is tremendous pressure on the management to sell the company to the highest bidder (link1)(link 2). Analysts are all over the place running their calculations to compute the fair value per share if there was a buyout. Amidst all this, Palm has announced that it is coming to ATT in the US and Vodafone and O2 in Europe. It has also announced in recent months, a foray into 3D gaming on its platform. All this is heartening to see when there is so much confusion and speculation surrounding its future.

One only hopes that Palm manages to survive and provide meaningful competition to the iPhone and Android OS. The webOS is a very innovative mobile OS that has forced Google and Apple to rethink some key features in their road-maps and such innovation is good for the industry and the user community as a whole. Everyone benefits!

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