This flies directly in the face of many "expert" pundits who hypothesized that Apple has bought up the supply chain rendering competitors unable to compete on price. Well, uhmmm.... It actually looks to be the other way around here. Comparing the iPad 2 (which is a slick device, but more aptly the ipad 1.5 incremental upgrade), to the Xoom, let's turn to a Gizmodo article that pretty much sums up my thoughts, except for one understandable error...
They're both using customized chips based around 1GHz dual-core processors, wrapped up with hardy graphics chips. The Motorola Xoom's Nvidia Tegra 2 has a dual-core heart of ARM's Cortex A9, which is very probably the soul of the iPad 2's A5 chip too. The GeForce graphics bundled in the Tegra 2 are formidable; presumably, so are the iPad 2's, especially if it's using PowerVR SGX543 graphics, as has been reported. In processing and graphics power, it stands to reason—at least until a proper teardown—that the iPad 2 and Xoom are about equally capable. The Xoom is verrrry fast, and that seems to be what people thought about the iPad 2 yesterday. Speed and its proper application matters as much as, if not more than, anything else.
The iPad 2's memory situation is still officially a mystery, which is deeply unfortunate. RAM isn't an idle spec: It's deeply indicative of how well it'll multitask, and—this is a huge deal—how well things like Safari will work. If it's got 512MB, it should be okay. The Xoom's got 1GB. The Xoom multitasks, flipping between apps and running tons of tabs in the browser, like a champ. And the multitasking interface for Android 3.0 makes it feel faster still.
A lot of the Xoom's other numbers are bigger than the iPad 2's. The screen is larger, with more pixels. It's 10.1 inches, with the 1280x800 resolution delivering 150ppi, to the iPad 2's 1024x768 screen, which offers 136ppi. So text on the Xoom can be slightly crisper. The Xoom's cameras are better too, at least on paper. The rear camera shoots 5-megapixel photos, while the front is 2MP. (Neither are particularly impressive in practice, though.) The iPad 2's rear camera shoots 720p video like the Xoom, but the stills are lower resolution. The front camera is only VGA (640x480). (Does that mean they'll be less impressive? The iPod touch's very similar-sounding camera was no showstopper, but the iPhone 4's 5-megapixel camera outshot 8-megapixel cameras in other phones.) The Xoom will have more Gees too, when it's upgraded to 4G on Verizon. The iPad 2 is theoretically faster for now on AT&T with 3G. Does all that make the Xoom automatically better than the iPad 2?
To a certain set of people, yes. What's key, though, is that the Xoom—along with any other tablet—doesn't outclass the iPad on any of the specs that Apple clearly thinks are most important. Processing power is (probably just about) even. The screen resolution is smaller, but the iPad display's proportions make it more flexible than the Xoom—it's truly designed to be used in portrait or landscape orientation, while the Xoom is almost 100 percent a landscape-oriented device. Battery life is better [Reggie edit: I don't think this is true, it appears they are comparable, but only real world side by side testing will reveal the truth]. Most important of all to Apple (and it's betting, to consumers), the iPad is cheaper. Everything else, beyond the screen and speed—like the cameras—are just good enough. Not amazing.
You see, everyone assumed the iPad would be cheaper, but this is not the case. As for the actual hardware being purchased, you are getting less for more. The key goal for Apple's management is to keep the focus away from performance and capability and focus where the other companies' management has historically been lacking, aesthetics and "cool factor". I actually believe Apple can pull that off, but the risk here is that any success will likely be short lived. A big part of being cool is being able to do things, and this next crop of tablets and smartphones can simply do more things than the Apple products currently on tap. The primary reason is the rapid refresh cycle of Android hardware and software. An Android quarter is analogous to an Apple year, simply because of the sheer magnitude of the development and research forces being brought to bear by all of those companies under the guidance of Google.
In addition, as a first attempt, I must admit that the management at Motorola is truly jumping up off of their collective asses and executing. Don't believe that the management of Motorola's myriad Android competitors will not follow suit. Cnet's Eric Franklin has put together a list of soldiers looking to fight on the front lines of the Tablet Commoditization wars, and the result is DOZENS of Honeycomb powered tablets coming out with fresh technology and ever lowering price points. For a precursor, simply look at how aggressive Motorola has been with its powerhouse Xoom, then realize that it is just the first in an army of competitors.
|Motorola Xoom||Apple iPad 2||Custom Nook Color - Under $300, can outrun the current iPad!|
Plus about 3 dozen other Honeycomb based competitors in less then 3 months!!! And to further put the myth of Apple owning the supply channel, thus preventing any competitors from coming in at competitor price points, let me present the sub $300 tablet that blows the doors off of the iPad - performance wise - as excerpted from Steve Jobs Calls End Of the PC, We Call The End Of The Fat Margin Tablet – Including The Pretty iPad, With Proof!...
If the iPad 2 is facing this type of price pressure and competition before its launch with only one true competing Android tablet on sale, simply imagine what this space will look like next quarter when these other guys jump into the mix (courtesy Cnet's Eric Franklin Franking) ...
|Name||OS||Price||Release date||Screen size|
|Acer Iconia Tab A100||Android 3.0||Unannounced||April||7-inch|
|Acer Iconia Tab A500||Android 3.0||Unannounced||April||10-inch|
|Asus Slider||Android 3.0||$500-$800||May||10.1-inch|
|Asus Transformer||Android 3.0||$400-$700||April||10.1-inch|
|Asus MeMO||Android 3.0||$500-$700||September||7-inch|
|Dell Streak 7||Android 2.2||$200-$450||April||7-inch|
|HP TouchPad||WebOS 3.0||Unannounced||Summer 2011||9.7-inch|
|HTC Flyer||Android 2.3||Unannounced||June||7-inch|
|Maylong Universe M-150||Android 2.2||$100||April||7-inch|
|Motorola Xoom||Android 3.0||$600-$800||Available now||10.1-inch|
|RIM Blackberry Playbook||QNX OS||$500 (16GB)||April||7-inch|
|Samsung Galaxy Tab 10.1||Android 3.0||Unannounced||Spring||10.1-inch|
|T-Mobile G-Slate||Android 3.0||Unannounced||Spring||8.9-inch|
|Toshiba Tablet||Android 3.0||Unannounced||June||10.1-inch|
|Viewsonic Viewpad 7||Android 2.2||$415-470||April||7-inch|
|Viewsonic ViewPad G Tablet||Android 2.2||$580||April||10.1-inch|
|Vizio Tablet||Android 3.0||Unannounced||April||
Keep in mind that the state prices will probably start dropping in near real time at launch as well. Just as I said on CNBC last year, margin compression and falling prices are the terms du jour...
[iframe http://media.cnbc.com/i/CNBC/components/Syndicated%20Video%20Player/videomodule.swf?id=1618325359&pcode=cnbcplayershare&play=&base=http://plus.cnbc.com/stickers/partners/cnbcplayershare/ 500 480]
WiFi-only Motorola Xoom appears at Sam's Club, bearing $539 price?
Monetizing the situation
Subscribers should follow the interactive models that I have supplied for both Apple margin maintenance (will be updated when I cover Apple in detail) and more importantly the Google Interactive Valuation Model - see Navigating BoomBustBlog Subscription Material To Find The Google Valuation Drilldown
First, go to the subscription content link in the user menu in the left hand margin of the site. Then click the “Search Document” link in the middle/top of the page. Enter Google as the search term.
Below are the results of that particular search. You can also choose to browse all of the reports in the technology (or whatever sector you have an interest in) section. The first selection is the Google Q3 review, which demonstrated that out analysis was right on point. Review our research, compare it to the “Street’s” research and expectations, then review Google’s actual performance. See Google’s 3rd Quarter Operating Results: The Foregone Conclusion That Was Amazingly Unanticipated by the Street!!! Monday, November 8th, 2010 for more on marking the research to market.
This is pretty much verbatim as we predicted it, and the stock and option prices are performing accordingly…
The table of contents outlines how we have broken Google down into distinct businesses and identified both the individual business models and the potential revenue streams, as well as valuation for each business line.
Page 57 of the analysis shows a sensitivity table which outlines the various scenarios that can come into play and how it will change our outlook and valuation opinion.
Professional/institutional subscribers can actually access a subset of the model that we used to create the sensitivity analysis above to plug in their own assumptions in case they somehow disagree with our assumptions or view points. Click here for the model: Google Valuation Model (pro and institutional). Click here to subscribe or upgrade.
In conclusion, if you are a paying subscriber and you have a problem, wish or request – feel free to contact us. Don’t let the problem or issue go unresolved. I value your business and patronage and I feel that we offer some of the best research available.