Why the undead $99 TouchPad might portend iPad’s doom

“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?

 

Related articles:
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

41 Comments

  1. HP already said that they will cost them 68 cents in EPS in their October Q. This translates to a loss of 1.9 billion dollars.

    Hpq and their banker friends are milking this to try and optimize the spinoff price. They are looking for sucker pension funds to dump this on.

    At the same time, rather than this being a complete loss, they can at least dispose of their inventory. The $99 will take care of delivery costs. I bet though, their suppliers are demanding cash up front. This media-hype may convince some of their idiotic suppliers to budge a bit.

    1. Well exactly. The jugheads who thinks this is a great revenue building idea or are planning to get one “if more become available,” haven’t guessed this is not a brilliant competitive move. They are dumping otherwise unsellable inventory for a steep loss rather than dump the whole pile into the garbage. The buyers will be tasked with putting them in the garbage.

    1. Thank you.

      I love this idea that these other companies can beat Apple by selling their crappy, knock-off versions at a huge loss.

      As long as Apple keeps making a great product, that’s both profitable & affordable, they’ll do just fine. If the other companies want to go at each others’ throats, by gaining market share at the expense of profits as they lose lots of money on every sale, have at it.

  2. For the end user of the TP: As a public relations stunt and subsequent sell of, do you think for a minute that the next company will not try to upgrade it and keep it backward compatible – creating shades of fractured Android OS? It will be a one time purchase and short time use with no future.

  3. For $99 I bought one for my kid who is prone to destroying things. With it he can watch movies and TV shows, play Angry Birds and check email. He doesn’t get to go near my iPad 2, a masterpiece in comparison to the Touchpad, but it’s good enough for him.

    People can say what they want about this costly debacle on HP’s part, but it’s either the most boneheaded business move in history or marketing genius. There is already talk directly from HP of new models that are cheaper and will run webOS. Don’t fool yourself because they sold a mere million, if that. There are a couple of thousand selling on ebay for between 200 and 300. That says something – either there is a demand, or there are a ton of idiots out there.

    I’d never trade in my iPad 2 for one of these things, but remember that not everyone has at least $499 to spend on a tablet, especially in this economy. App development will continue for a while, so don’t count it out just yet.

    1. But remember, when that battery dies… Good luck finding a replacement. Or Any updates to fix that bug that crashes the system everytime you open an app. 3rd party or hp app.. Neither will have an update and no way to go back to older version.

      Price may be good, but life of product is key here. No support for a discontinued item, have to think about that. Hardware nor software support..

    2. written like a true pr shill for HP, though more nicely written than most, which usually start out with “i’m a total apple fan boy, but….”
      at least this one includes a kid to soften the “message” of: “he can watch movies, play Angry…” and “don’t full yourself because they sold a mere million..there is a demand…” not everyone has $499 to spend…” and on and on….
      lots o’ luck on this venture.

      1. @writingdevil,

        I have spent more than most on Apple hardware, and trust me, I am as much of an Apple whack job than anyone else. If it made sense to do so, I’d buy my kid an iPad in a second. But he’s an 8 year old, and I’m not going to risk $500 on him at this point. I let him use mine, but supervised, but I can’t be leaning over his shoulder every minute of every day (although I’d like to, if i didn’t have to work).

        My comments were not a “PR shill” as you so eloquently pointed out. For $99 he gets a tablet that’s good enough for him, and if the dang thing breaks or the battery wears out, so be it. The Touchpad is not so shitty that it isn’t good enough for him. It’s enough for him. And if you can’t afford an iPad now, $99 is a steal.

        1. I read your original post and agree with you wholeheartedly. $99 seems like a good sum to burn for your kid to learn the rudiments of tablet computing. An added bonus is you’re buying him the best alternative to iOS and that isn’t Android for sure.

          Don’t let the negative voices shout you down.

  4. Poor HP, nobody told them that tablets don’t need $30 printer cartridges. It is amusing to see those who think that the whole thing is part of some brilliant strategy. Just think how many POS sedans Kia could sell at $3,000 each, by merely incurring a $6,000 loss per vehicle.

  5. Granted I was tempted to pick up a crappad as a simple browser etc.

    Then I used one… Pass.
    Even at $99 I felt I would be getting ripped off.
    I did like the effect when you touched the screen, ripple or whatever they call it around you finger. But I bet that would get old fast.

    But slow… Laggy input.
    I said before it was a floor demo model, so who knows what was done to it by all the little kiddies putting their filthy paws all over it. (both young and “adult”)
    I just didn’t want to take the chance that it was normal for webos.

    The crappad will only be a footnote in the end of the tablet wars. When there is no support for it, no apps, nowhere to get a replacement part.. In about 3 months. People will toss them in the garbage.

    Some are working to put android on it, that was my thought also. So that may be it’s only viable use soon.

    People with a budget will flock to it, but you do get what you pay for…
    Save the money and go buy a used iPad 1. Or save a little more and get a real tablet, iPad 2.

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