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Motorola Mobility Cuts Tablet Price

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Motorola Mobility Holdings Inc.(MMI - Free Report) recently reduced its XOOM tablet prices from $599 to $499, thus taking the competition to other tablet makers.

Samsung’s Galaxy Tab, Research In Motion Ltd. PlayBook and Apple Inc’s (AAPL - Free Report) iPad are all priced at $499. Thus the price cut in XOOM tablet will place all the products at par on the basis of prices. Despite such price reduction, none could match the sales of Apple’s iPad.

Motorola Mobility launched its first tablet called “XOOM” in mid-February 2011. XOOM is the first device to run on Android 3.0 Honeycomb operating system, specifically designed by Google for tablets. XOOM can be later upgraded to 4G LTE network. During the first quarter of 2011, Motorola Mobility shipped nearly 250,000 XOOM tablets compared to 4.69 million iPad tablets and 5,00,000 Research In Motion PlayBook tablets.

As per the industry analysts, the current market share of Apple’s iPad is approximately 70%, which indicates its dominance over the tablet markets. However, smartphones and tablets are expected to grow at a CAGR of 28%-30% over the next three years. This is expected to provide meaningful top-line growth opportunity for Motorola Mobility Holdings.

According to Gartner research, Google’s new Android 3.0 based tablets will topple Apple’s iPad by 2015, which we believe will boost the other tablet makers who are using Android 3.0 based tablets.

Supported by strong market traction of its 3G Android-based smartphones, Motorola Mobility is regaining lost ground in the lucrative U.S. smartphone market. The company’s first-quarter 2011 results surpassed the Zacks Consensus Estimates.  We believe the acquisition of Zecter will enhance Motorola Mobility’s innovative capacity with synchronization and streaming technologies for on-demand mobile digital contents. Zecter integration will enable Motorola Mobility to differentiate its offerings in the market with music streaming facilities.

However, Motorola Mobility already declared that the company is facing intense competition for Apple’s iPhone 4 from Verizon. Even worst, the ATRIX smartphone is not performing according to management’s expectation. Furthermore, Motorola Mobility announced that it has deferred its much-hyped 4G DROID BIONIC smartphone roll out with Verizon by a quarter.

We, thus, maintain our long-term Neutral recommendation for Nokia. Currently, Nokia has a Zacks#3 Rank, implying a short-term Hold rating on the stock.

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