Amazon's move to lower the price of its now entry-level tablet to $139 may have sent ripples through the portable computing market yesterday, and it's worth exploring whether the aggressive pricing will also hurt LeapFrog's $149 tablet.
Ultra has been earning plenty of accolades as one of this upcoming holiday season's hottest playthings.
- Last week it was included in Kmart's Fab 15 holiday toy list.
- Ultra was named to Dr. Toy's "100 Best of 2013" list as well its "10 Best Technology 2013" countdown last week.
- On Tuesday, the sturdy tablet made the cut of Toys R Us' Fabulous 15 list.
- Yesterday it was on The Toy Insider's "Hot 20" 2013 list.
Clearly the expectations are for a strong showing this season. The original LeapPad Explorer may have snuck on as a sleeper hit of the 2011 holiday shopping season -- even topping a few layaway wish lists -- but the market's ready for the third generation of LeapFrog's tablet.
Ultra offers access to the same rich ecosystem of more than 800 interactive learning games and applications that has drawn parents of young children to the LeapPad platform, but this time the device can also do far more outside of LeapFrog's realm.
BMO Capital Markets did downgrade the stock earlier this month on glitch reports it encountered in testing Ultra -- lowering its price target on the shares from $15 to $10 -- but consumers don't see it that way. The tablet's user ratings on Amazon.com are comparable to the previous two incarnations.
The real challenge for Ultra will come as it faces Amazon practically giving away its full-featured Kindle Fire HD for $139. Amazon introduced its first tablet in time for the 2011 holiday shopping season -- just like LeapFrog -- but it was priced at $199 at the time.
The original LeapPad Explorer had no problem carving itself a unique market when it was introduced in summer 2011. Apple's iPad seemed to have the market all to itself at the time, but then came the invasion of dirt cheap Nexus and Kindle Fire devices. Apple is actually now selling fewer iPads than it was a year ago.
The $99 price for the original LeapPad also didn't hurt. LeapFrog's Ultra carries a steeper $149 price tag, but it also has many of the features that one expects from entry-level tablets. In short, it's more than just a learning toy, and this may make it more appealing to slightly older kids than the ones drawn to the first two incarnations.
LeapFrog's problem is that while its LeapPad was an easy purchase to consider three summers ago when the alternative was to hand over a fragile $499 iPad to a young child, it's no longer as scary to hand over a $139 Kindle Fire HD in a world where so much data and purchases are backed up on the cloud.
LeapFrog is naturally going to hope that its award-winning learning applications and its vetted tablet experience will help set it apart this holiday season. Even Toys R Us introduced its own tablet last year, and LeapFrog's second-generation tablet did just fine.
This will be a challenging and possibly defining moment for LeapFrog. The stock has slipped 21% since its peak last month on these very jitters, so the upside is healthy from here if it proves the skeptics wrong.
One way or another, LeapFrog has to make the grade this season.
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