Motorola Xoom sales tepid; Production cuts next?

Summary:With Apple launching the iPad 2 Friday, Motorola Mobility may be forced to scramble to bolster sales of the Xoom tablet. Worries are mounting.

With Apple launching the iPad 2 Friday, Motorola Mobility may be forced to scramble to bolster sales of the Xoom tablet.

Jefferies analyst Peter Misek on Friday argued that earnings estimates for Motorola Mobility are too high for the second quarter and 2011 because sales of the Xoom and Atrix haven't lived up to expectations.

Misek said:

Xoom sales have been underwhelming. While marketing has just started we believe MMI will likely have to cut production if it already has not done so. We believe the device has been a bit buggy and did not meet the magic price point of $500. We believe management knows this and is hurrying development and production of lower cost tablets. Importantly we believe management will likely have to make the painful decision to accept little to no margin initially in order to match iPad 2’s wholesale pricing.

On the Atrix front Misek noted that the BlackBerry Torch is outselling the Atrix at AT&T.

We'll focus on the Xoom for the moment. Misek's take on tepid Xoom sales backs up what we've been hearing anecdotally. We've heard of a handful of folks that have returned the Xoom. The frequent complaint is that the Android 3.0 Honeycomb software is buggy and prone to crashes. Expectations are simply higher given the Xoom's price.

Trip Chowdhry, an analyst at Global Equities Research, also indicated that Google's perpetual beta approach doesn't fly for electronics. Google's approach works for free services, but expectations are different for a tablet that can run you $800. "The consumer is unforgiving," said Chowdhry in a research note.

Reviews of the Xoom have also been tepid. The good news is that Xoom prices will come down because Motorola Mobility is going to have to move inventory.

Related:

Topics: Mobility, Enterprise Software, Hardware, Laptops, Tablets, Wi-Fi

About

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CN... Full Bio

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