Tablet computer makers, scrambling to get attention in the highly competitive market, are turning to a time-tested tactic: slashing prices.

Research In Motion has cut the price of its 64-gigabyte BlackBerry PlayBook tablets by $100 to $299, a deal that will last until February. The 16-GB Sony Tablet S tablet sells for $399, down $100 and lower than the 16-GB Apple iPad 2, which starts at $499. And Verizon Wireless shaved $50 off the Motorola Droid Xyboard for customers who sign up for a two-year data plan.

A gradual decline in prices is inevitable for consumer electronics makers. But the recent downward pressure on tablet pricing also reflects a broader volatility in the market that has been turned upside down by the arrival of cheaper, snazzier models. And some manufacturers may be looking -- or forced -- to get out of the business.

A decline in tablet prices will continue throughout the year, analysts predict. Reasons:

Market correction. Some tablets just weren't well made and need to be discontinued, says Avi Greengart, analyst at Current Analysis. "If you have an uncompetitive product, you're going to have to take it out and move the inventory. And one way to do that is to lower price," he says.

RIM warned in a recent earnings statement that its tablet sales have slowed, and analysts speculate that the company could be looking to get out of the business. "You don't cut the price (that much) to create market share. You do that to exit the market," Greengart says.

Flawed pricing strategy. Many tablets are simply overpriced, says Roger Entner of Recon Analytics. Apple can afford to charge $499 for an entry-level iPad given the large app market and the brand appeal. But other manufacturers should be more realistic, Entner says. "BlackBerry and Sony have cut their price point from ridiculous to mildly amusing."

Cheaper, well-known rivals. Amazon and Barnes & Noble -- makers of the $199 Kindle Fire and $249 Nook Tablet, respectively -- are selling their devices at or below cost because they view them as convenient platforms on which to sell content, a claim that other low-cost tablet makers can't make, Entner says.

Software upgrade. Manufacturers want to shed inventory ahead of software upgrades that will render current products stale. RIM is expected to update PlayBook's operating system next month. Android's latest software is just being adopted. And analysts expect new tablets based on Microsoft Windows 8, due out later this year.

© 2012 USA TODAY. Syndicated here under contract with YellowBrix, Inc. All rights reserved.
 

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