“Little did we know that HP would prove everyone wrong with the sudden discount of the Touchpad to $99 last weekend. Just like any other consumer device, cost is king,” Robert Thompson blogs for Freescale. “Sunday morning, the line was out the door at my local Best Buy and the stock ran out within an hour. If you still want to buy one, good luck.”
“What are people buying for $99? With the surprise announcement last week by HP to spin off the personal systems group (PSG) and cease all sales of the tablets and other WebOS-based devices, the fear is that the user will get a tablet that has few apps to download and is only good for doing simple activities such as playing games, searching the web, using email and accessing social media,” Thompson writes. “Coincidentally, Google’s research on tablet usage indicates those activities are how most people want to use their tablets. Is $99 a good buy for a tablet that isn’t perfect, but is a good product from both a hardware and software perspective? Yes, and I’ll be buying one if more become available.”
Thompson writes, “What will be the short- and long-term impact for the rest of the tablet market? In the short term, it’s good news for end consumers, but bad news for OEMs, including HP. Best Buy and other retailers now have some evidence that tablets can sell in volume and replace laptop sales at the right price. This could lead to more shelf space for in-store branded tablets below $200 and reduce gross margins for other OEMs that focus on tablets and competing laptops as prices have to be reduced. In the long run, this could actually be good for the tablet market and HP. The sudden installed base of WebOS users will make it more attractive for developers to port apps to WebOS and create an alternative revenue stream to iOS and Android.”
Read more in the full article here.
MacDailyNews Take: Just how many units do people like Thompson think HP produced? Hint: It’s not an open-ended, balls to the wall production run like iPad and iPad 2. HP likely produced under a million units total. So they have an installed base of basically no one in the grand scheme of things. And the handful of people they do have are proven to be either too cheap or too poor or too tech illiterate for app developers to care about. The type of people who line up for EOL’ed product at 80% off are not a healthy target demographic. They aren’t going to be buying apps; they’ll be more free-app-addicted than even Android settlers.
Brian Caulfield writes for Forbes, “This week, HP announced on one of its blogs that it will be building another run of the profit-sucking machines and selling them for $99. Presumably HP’s has already paid for the parts, so it might as well clear them out?”
“Losing big bucks on hardware is an ugly business model, but it’s not uncommon, and it might just be the future of the tablet market. Just look at the market for gaming consoles, where hardware is sold for a slim profit, at best,” Caulfield writes. “Now analysts are betting Amazon will take the same approach, predicting the online retailer will sell a tablet computer for hundreds less than Apple’s iPad, making money by stuffing the tablets full of links to its music, video, software, and electronic book stores.”
“So is there a future for Apple in the tablet business? Apple has shocked competitors by using its scale and supply-chain management skills to build profitable products at prices it competitors haven’t been able to beat,” Caulfield writes. “No one had a product that could generate that kind of excitement until HP sparked a frenzy when pulled the plug on its poor-selling TouchPad and slashed the price to $99. It’s an ugly way to go, but sacrificing profits might be the quickest way to rack up big revenues, and blunt Apple’s momentum.”
Read more in the full article here.
MacDailyNews Take: As if Apple, with more money than any of them, couldn’t simply respond in kind and lock up the “tablet” market even more soundly than they have already. Also, remember, there were a slew of Portable Media Players that cost less than iPod and a bunch of music services that undercut iTunes Store, too. How’d they do in blunting Apple’s momentum?
HP’s $99 TouchPad fire-sale burns Apple’s iPad foes – August 31, 2011
HP to produce one final run of TouchPads to meet ‘unfulfilled demand’ – August 30, 2011