Motorola Mobility Holdings lined up notably strong U.S. distribution for the launch of the XOOM WiFi.
Amazon.com (ticker: AMZN), Best Buy (BBY), Costco Wholesale (COST), RadioShack (RSH), Sam's Club, Staples (SPLS) and Wal-Mart Stores (WMT) form an unusually broad launch pad for the tablet. The price is set at $599, though we expect several of the retailers to debut the device with promotional pricing around $550.Motorola (MMI) is now set to launch its WiFi-only tablet two weeks before Research in Motion (RIMM) gets its similar, though smaller Playbook device out, likely close to the $500 retail price point. The notably cheaper price of the WiFi version compared to its 3G sibling is, in our view, likely to help sales.
The current [ Apple (AAPL)] iPad 2 shortage, combined with exceptionally broad distribution of the XOOM WiFi, gives Motorola a good opening, in our view. We expect the sales of Xoom WiFi to be boosted by what we view as a surprisingly thin early supply of iPad 2.
In our view, Apple left a lot of money on the table when it could not deliver sufficient launch volumes for its new tablet. The wait time for the iPad 2 is now up to five weeks at Apple.com. Our research indicates that the reported recent chilling of the Apple-Samsung relationship can probably be traced to Samsung's challenges in getting the new A5 processor ramped up fast enough to meet Apple's demands.
We now expect Motorola to comfortably beat our 400,000-unit XOOM projection for first-quarter 2011. Some extra volumes are likely to come from what seems like a robust series of European XOOM distribution deals. We expect XOOM to be launched by the British electronics powerhouses Dixon's and Carphone Warehouse in the U.K. in early April.
Motorola is likely to ship some XOOM units to Europe and Asia during the last two weeks of first-quarter 2011. We believe Dixon's, Carphone Warehouse and [Deutsche Telekom's] T-Mobile in Germany are all committing to relatively strong marketing support for the XOOM. Our research indicates European distributors and operators are worried about Apple getting a stranglehold of the tablet market and are set to promote [ Google (GOOG)] Android alternatives strongly this spring. Motorola is in a good position here, in our view, because the Honeycomb tablet launches of vendors like LG and HTC seem to be somewhat delayed from original launch targets.
We believe several recent store checks indicating tepid sales of Motorola Atrix phone at AT&T (T) are misleading. Amazon is undercutting AT&T notably on Atrix pricing, at $130 versus $200. A similar situation took place last autumn during the Blackberry Torch launch -- the meaningfully lower Amazon.com price drove consumers to buying the Torch from the Web retailer, triggering a series of misleading store checks that underestimated national Torch sales substantially. This in turn created the backdrop for Research in Motion's revenue and earnings-per-share surprises for the autumn quarter.
We believe 50%-70% of sales of some new models now take place at Web retailers, particularly when there is a notable price gap between Web retailers and traditional stores.
We believe Motorola is on track to sell 500,000 units of the Atrix during first-quarter 2011, beating our original expectations somewhat. The delay of the HTC Thunderbolt launch at Verizon Wireless [a joint venture of Verizon Communications (VZ) and Vodafone Group (VOD)] has helped a bit, in our view. We expect strong Verizon marketing support for the Motorola Bionic in April as the carrier starts its big LTE marketing push.