Remember the Xoom? We really liked it. Anyway, Jefferies analyst Peter Misek says that the Xoom is going to be knee-capped by the iPad 2 this week and probably for the rest of its natural life, a situation that does not bode well for the Honeycomb tablet.
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.
What needs to happen, clearly, is a price drop. While it’s difficult for manufacturers to beat Apple right now, there has to be a way for them to head Big Cupertino off at the pass on some of the more expensive parts of their devices, including memory and touchscreens.