Motorola: Detwiler Sees Xoom Struggling

From Barron's - Posted by Tiernan Ray : Analysts at Detwiler Fenton this morning write that Motorola Mobility’s (MMI) “Xoom” tablet, which went on sales last week at Verizon Communications’s (VZ) Verizon Wireless, may be having a rough first go of it.

The tablet computer debuted last week to fairly favorable reviews from, among others, The New York Times’s David Pogue, with The Wall Street Journal’s Walt Mossberg calling it the first real competitor to Apple’s (AAPL) iPad.

“After almost one week on the market, it appears that the sell through of Motorola’s Xoom has been extremely light,” reports the firm, without specifying sources for the information. Detwiler attributes the apparent lackluster results to, “its high price, lack of consumer applications and the anticipation for today’s expected Apple (AAPL) iPad 2 announcement,” which is expected to be this afternoon.



Reports out of Asia, moreover, that the Xoom might be coming out of factories at a rate of 700,000 to 800,000 units this quarter are “outrageous,” Detwiler asserts, given the shortfall in this first week.

Moreover, Best Buy (BBY) having the exclusive to retail the thing, combined with its high price, appears to have been a mistake on Motorola’s part:

We believe that total channel sell-in for Q1 will only amount to 150K-200K units, depending on how aggressive Verizon (VZ) gets with inventory stocking. It appears that BBY is sitting on enough inventory to get the retailer through the end of Q1 without problem at this point. Note that VZ and Best Buy (BBY) have a 60 day exclusive on the product in the US a major marketing mistake by MMI in our opinion. While MMI launched the Xoom at $799 at retail (or $599 subsidized with 2-year contract at VZ), retail contacts believe an unsubsidized price point of $649 and subsidized price point of $499 is about the price ceiling for such a product. However we don’t expect to see such a price point anytime soon unless MMI is willing to sacrifice margins and/or VZ ramps up subsidy support.

Detwiler expects Best Buy will “rethink” the pricing of the device to try and boost sales.



No wonder, then, that The Journal’s Ben Worthen today writes of looming talk of a tablet price war.

Motorola shares today are down 53 cents, or $1.80, at $28.97.