File this one in the “too little, too late” category: Motorola (NYSE: MMI) has finally decided to drop the price of its Wi-Fi only Xoom Android tablet to $499, matching the price of the least expensive iPad 2. Had this happened four months ago we might be looking at a different environment for the Xoom, but it didn’t, so we’re not.
Motorola shipped just 250,000 Xooms in the first quarter they were on sale, refusing to quantify how many units actually made it into the hands of customers. It launched the device without an option to buy a Wi-Fi only version, which seems to be the most popular tablet configuration in the early days of the device, which meant that the cheapest Xoom available at launch cost $599 plus a two-year commitment to Verizon, and $799 without a contract. Motorola later introduced a Wi-Fi only version for $599, $100 more than the iPad 2. That didn’t work.
And so Motorola announced on its Twitter feed Wednesday that the Wi-Fi only Xoom is now $499. That price, set by Apple (NSDQ: AAPL) for the cheapest iPad, is what all other tablet vendors have eyed as their baseline price, with Acer, Research in Motion (NSDQ: RIMM), HP (NYSE: HPQ) and Samsung all introducing $499 tablets over the last few months. Yet none have come even close to moving as many tablets as Apple, meaning that simply matching Apple’s prices isn’t going to cut it.
iPad challenges may fare better with a revamped version of Android scheduled to be out later this year, but competing on price with Apple is going to get more and more difficult if Apple continues to secure the types of component deals that have financial analysts salivating.