Say It Isn't So, Moto

Two weeks ago, I was sorely tempted to add shares of Motorola Mobility (NYSE: MMI  ) to my winning tech portfolio. Today, I'm contemplating shorting the stock. What's changed? Xoom.

Tech blog Engadget reports that Best Buy (NYSE: BBY  ) will begin selling Moto's Xoom tablets on Feb. 17. They'll be powered by Google's (Nasdaq: GOOG  ) Honeycomb operating system, sport 32GB of data storage, and include connectivity to Verizon's (NYSE: VZ  ) 3G network. Moto's asking price for all this is apparently $700, or about in line with a comparably equipped iPad.

I've got three words for this: Worst. Idea. Ever.

Moto is following when it could be leading. Why not price the 3G Xoom as if it offers a better deal than its iPeer -- $599, perhaps? Cheaper pricing would spur demand and separate this Xoom from the 4G version that's coming in just a few months. The one that's most likely to compete with iPad 2.

Moto is missing an opportunity to make the Xoom's launch memorable, when that's exactly what the company needs. It won't be long before Honeycomb tablets from ASUS, LG, Samsung, and Toshiba crowd the market.

Right now, the iPad is the top dog and first mover in the market for smart tablets. Tens of millions have already been sold, and a new version of the device is forthcoming. Evicting it from the catbird seat won't be easy under the best of circumstances. From what we're hearing today, Motorola's moves aren't likely to change that.

But that's just my take. Now it's your turn to weigh in. Could Motorola get away with pricing the Xoom at a premium to the iPad? Please vote in the poll below, then leave a comment to explain your thinking.

What will be the big trends of the next five years? We asked our top equity analysts that question and they came back with five stocks we've put real money behind. We profile all five picks in a new special report. Get instant access by clicking here -- it's free.

Interested in more info on the stocks mentioned in this story? Add Motorola Mobility, Best Buy, Google, or Verizon to your watchlist.

Best Buy and Google are Motley Fool Inside Value picks. Google is also a Motley Fool Rule Breakers recommendation. Best Buy is a Motley Fool Stock Advisor selection. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is a member of the Rule Breakers stock-picking team. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool owns shares of Best Buy and Google and is also on Twitter as @TheMotleyFool. Its disclosure policy would love to hear a 3-year-old pronounce "Xoom."


Read/Post Comments (12) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 25, 2011, at 2:00 PM, mrhmotley wrote:

    Good article Tim. On the surface I would be inclined to agree with you. On the other hand, that presumes everyone wants to buy Apple and a lower price point would be saying that the Zoom is an inferior product. They don't and it's not. Also, its easy to drop prices by various means but much harder to raise them. Where is MMI going to be in a year or two? Who knows. However, I seem to recall Motley Fool having MOT as a 2 star stock just a couple of months back when it was $7.70 or so a share. Now its completed the split and is up by how much? 30%? Yet now its a 3 Star stock. My guess is they will do good job at reclaiming market share and in 12 months $40 a share will seem cheap. But then I bought at $7.70 so maybe I would say that.

  • Report this Comment On January 25, 2011, at 2:46 PM, bda123 wrote:

    Tim,

    Your comments are dead on. After CES I thought the same thing and actually reviewed the stock. Now I think it is overpriced. I sure home they can find a way to put it in the $400-$500 price range or it will be just another lost opportunity.

  • Report this Comment On January 25, 2011, at 3:31 PM, samdetroit wrote:

    Looks like a few people are thinking the same thing. The stock has stumbled ever since the Xoom pricing announcement.

  • Report this Comment On January 25, 2011, at 3:57 PM, justacog wrote:

    "Cheaper pricing would spur demand and separate this Xoom from the 4G version that's coming in just a few months."

    You're missing the point. Xoom will allegedly be UPGRADABLE to Verizon LTE 4G via an upgrade module. Details TBD. You shouldn't have to buy a whole new tablet like some other fruity competitors.

  • Report this Comment On January 25, 2011, at 4:14 PM, TMFMileHigh wrote:

    @justacog,

    >>You're missing the point. Xoom will allegedly be UPGRADABLE to Verizon LTE 4G via an upgrade module.

    No, that *is* the point. By overpricing the entry level device, Moto leaves no room for the 3G model to breathe. There's nothing special about it. It's merely 4G lite and always will be, yet it's priced as if it's going to face off against iPad 2.

    I've seen the tab and I liked what I saw. All I'm saying is that the pricing and marketing strategy is off, and I think that'll cost investors.

    FWIW and Foolish best,

    Tim (TMFMileHigh and @milehighfool on Twitter)

  • Report this Comment On January 25, 2011, at 4:39 PM, justacog wrote:

    "It's merely 4G lite and always will be"

    Do you not know what the word "upgrade" means? It wouldn't surprise me at all that the LTE module will be free with your Verizon LTE service for you Xoom. They are letting us have access to the sweet Honeycomb goodness while they get the LTE module ready to drop in. There likely won't even be an option to buy an LTE iPad until NEXT YEAR.

  • Report this Comment On January 25, 2011, at 4:42 PM, justacog wrote:

    The Xoom is not an "entry level" device.

  • Report this Comment On January 25, 2011, at 5:06 PM, TMFMileHigh wrote:

    @justacog,

    >>Do you not know what the word "upgrade" means?

    Of course. But tell me: what reason would a buyer have to purchase the 4G device in Q2 when the 3G comes with a free 4G upgrade?

    Will the 4G model be more expensive? Definitely; it'll be a native 4G device. So at some point, Moto is going to ship 4G at greater than $700. Probably $899 or so.

    That would be fine if the Motorola brand had permission to sell premium products, but that's not the case.

    >>There likely won't even be an option to buy an LTE iPad until NEXT YEAR.

    Sorry, but this is wishful thinking. We saw AT&T LTE demonstrated at CES and we now know it's only a few months away. Probably by June, right around the same time as the 4G Xoom ships.

    Foolish best,

    Tim (TMFMileHigh and @milehighfool on Twitter)

  • Report this Comment On January 25, 2011, at 5:16 PM, justacog wrote:

    "We saw AT&T LTE demonstrated at CES and we now know it's only a few months away."

    Talk about wishful thinking. AT&T can't even get their existing network right. And that doesn't even address where anything LTE is in the Apple pipeline.

  • Report this Comment On January 25, 2011, at 5:44 PM, TMFMileHigh wrote:

    @justacog,

    >>Talk about wishful thinking. AT&T can't even get their existing network right. And that doesn't even address where anything LTE is in the Apple pipeline.

    And that's a bet. I saw it working in Apple devices at CES, but you're welcome to play on the road, at night, in the rain if you really insist on doing so.

    Thanks for writing and Foolish best,

    Tim (TMFMileHigh and @milehighfool on Twitter)

  • Report this Comment On January 25, 2011, at 9:22 PM, justacog wrote:

    ... play on the road.... how suave..

    http://gizmodo.com/5725624/att-mentions-an-lte-apple-device-...

    "AT&T contacted us to let us know that no iPhone-related LTE announcements were made. Apparently the "4G" mentioned alongside de la Vega's mention of Apple did not refer to LTE "4G".

    "

  • Report this Comment On January 26, 2011, at 9:52 AM, grimm26 wrote:

    @justacog "Apparently the "4G" mentioned alongside de la Vega's mention of Apple did not refer to LTE "4G"."

    Right. Verizon will have an LTE "4G" network and AT&T will have a HSDPA+ "4G" network. Neither of those are actually 4G, but they are both high speed data networks. It will remain to be seen whose implementation will provide the fattest data pipe.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1428411, ~/Articles/ArticleHandler.aspx, 10/23/2014 7:08:22 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement