Edible Apple

A number of Apple retail stores saw iPad 2 lines begin to form as early as Wednesday of last week – all for a product set to go on sale at 5PM two days later. With the iPad 2 now officially out of its cage, Apple is finding itself in the enviable position of having demand far exceed supply. Despite its best efforts to ramp up supply, a number of retail outlets are reporting that they’re completely sold out of the iPad 2, with some stores noting that they sold out in just 2 hours.

Meanwhile, if you’re interested in picking up a Motorola Xoom tablet, you have nothing to worry about. No long lines. No sell outs. No nothing.

Jefferies analyst Peter Misek on Friday relayed that Motorola Xoom sales have thus far been underwhelming and have not lived up to internal projections and expectations.

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.

Speaking of marketing, we saw a pretty absurd Xoom commercial over the weekend. Much like Droid advertising, the advert had a futuristic feel to it with a odd robotic theme. But with the iPad 2 at the forefront of the tablet discourse these days, it remains to be seen what uptick in sales, if any, the Xoom will see now that the device’s advertising campaign is underway. Factor in a much more daunting retail price of $799 without a 2-year contract and things don’t looking too promising for Motorola.

Compounding matters is the fact that the Xoom doesn’t appear to be resonating with folks who actually purchased the device. Higher than expected return rates and complaints about buggy software (thanks Honeycomb!) don’t bode well for the Xoom’s prospects either.

People may not have a problem with software quirks when they’re using something for free, as most of Google’s software tends to be, but tacking on a $799 pricetag raises consumer expectations accordingly. Gmail was in beta for god knows how long. But when it comes to Android 3.0 ‘Honeycomb’, Google simply does not have the luxury to slowly but surely work out its software kinks. Much like how Apple made a name for itself by releasing hardware and software that “just works”, Google will need to do the same if they seriously want to compete in the tablet space.

All that said, Motorola may be forced to scale back production and, perhaps, lower the Xoom’s asking price if sales don’t improve.

via ZDNet