The Android HP Slate 7 might signal good news for Microsoft

About a year ago, I had bought a newly released Nexus 7 and wrote a review on it. The "tl;dr" version of that review was: "Why would you not find the additional money and buy an iPad?"

When HP announced the release of the Jelly Bean HP Slate 7, I bought one to have a look at.

But events of the past year have encouraged me to take a more nuanced view with regards to the Slate 7 and its sibling low-end Android tablets. Specifically, just like Android phones are now mature and decent enough to play well in the market against the iPhone, Android tablets are now good enough to hold their own in the tablet market against the iPad.

The iPad is still the best tablet on the market, and if you happen to have the available cash, it's still the one to buy. However, if you're definitely not going to buy an iPad (or even a Windows tablet, which we'll come to), buying a Slate 7 actually is good value for money.

Fine

In the US, the 8GB HP Slate 7 can be yours for $170. (In the UK, I paid £129, including VAT.)

Also in the UK, the 16GB Nexus 7 can be yours for $200.

If you're in the market for a $200 tablet, both of these are fine. They're both basically the same device. The HP has the edge on build quality, and also has a rear-facing camera and expandable storage, whereas the Nexus doesn't. The Nexus also has a higher-resolution screen, and the Slate's screen is decidedly murky. Seeing as the whole point of a tablet is the screen, that counts for something.

So, sure — it's fine. The Slate 7 is "fine". And the Nexus 7 is also fine.

Cheap

With regards to cheapo Android tablets, we need to think of a couple of things. Whilst you have been able buy dirt cheap Android tablets for very little money, the market now has the option of two devices that are very good. Three, if you include the Kindle Fire, which for this argument we might as well do.

Unless we now live in a parallel universe, where market forces don't apply, downward price pressure on decent Android tablets now seems like a certainty. As consumers, we can now look forward to average selling prices (ASPs) on low-end Android devices drifting lower.

HP appears to have deliberately priced the Slate 7 to be price competitive with the Nexus 7. That tells us how old school OEMs are thinking about this new market opportunity. Spoiler: They're looking at it in exactly the same way that they've been looking at the PC market.

A couple of days ago, Benedict Evans, a freelance market analyst, tweeted this chart. It shows the rate of decline of PC ASPs since 1995.

Ignore the numbers on the chart — just look at the trend. (The ASP numbers include Apple Mac ASPs, which tend to push a "whole market" view higher.)

That tells you very clearly that people buying PCs and people selling PCs are in cahoots. People — business and individuals — want to spend the least amount of money possible to get a "good enough" piece of kit. The OEMs have got pretty good at supplying cheap, commodity hardware into a market that's indifferent to premium kit. (And, of course, the vast majority of the market is indifferent to premium kit.)

The question is to me is: Why would HP, which knows that the "pile 'em high, sell 'em cheap" method basically works for it, not intentionally repeat history and just try to win the game by trying to sell masses of cheap kit at razor-thin margins?

That seems to be the whole strategy with the Slate 7. Get a good enough product into the market by way of a "foot in the door". There is, after all, no point in letting Google just have the whole market.

Windows

So, what happens if we mix Windows in with this? DigiTimes recently ran a piece saying that "ex-factory" prices of white-box Windows 8 tablets will come in at around $300. After they get through the channel, end-user pricing is around $500. A health warning though: DigiTimes can be a bit hit and miss with its analysis.

But those DigiTimes numbers seem to be backed up by the fact that we know Windows RT devices like the Lenovo Yoga 11 is available for $549 on Amazon. Those companies that are able to make them like to see street prices of around $500 for an ARM-based Windows tablet.

Make them smaller and use an x86 chip rather than ARM, and you can likely trim the price, but can you get a 7-inch Windows tablet down to a street price of $170? My ZDNet colleague Ed Bott recently wrote up the Acer Iconia W3-810 tablet, which leaked on Amazon. This is an 8.1-inch Atom-based tablet. Probably yours for $380.

There's no way that x86-based Windows tablets are going to end up at $150-ish anytime soon, which suggests to me a market where you end up with $150-ish Android tablets at the low end, and a premium sector that's made up of iPads and Windows tablets at round $400-ish

That seems to be where things get complicated.

If the market is driven solely by price, how well does Apple do in competition with a proper, "full-fat" Windows PC at roughly the same price? I think the iPad is a truly fantastic device, and every Windows tablet-like thing I've ever tried has disappointed me, but if you want to spend around $400 on a piece of kit, why would you buy a less-functional iPad when you can buy a more-functional Windows tablet? The logical decision in that scenario has to be to buy the Windows tablet.

That idea ignores the fuzzy effect of the ecosystem. The point of an ecosystem, like Apple's with the iTunes/App Store ecosystem, is to lock in customers. Does the iPad ecosystem count for something when choosing not to buy a Windows tablet? That might control the situation somewhat; otherwise, it applies downward pressure on iPad prices toward the nominal price set by Android tablets.

(The corollary point there being around whether Microsoft can replicate the success of the Apple system.)

Ironically, then, it seems to me that Microsoft does pretty well out of a "race to the bottom" Android tablet market by potentially removing some of the cachet around the iPad, and making the selection of a Windows tablet more logical, whilst also justifying an average selling price double that of an Android tablet by offering a great deal more functionality and capability.

Although, even in that context, I don't believe in "one device to rule them all". Tablets are good at some things, PCs are good at others. If you have the need for a PC, it doesn't necessarily follow that your totality of needs are satisfied by a tablet-esque PC — people are likely to have both.

And, of course, the set of people who can do quite happily with a tablet and no PC grows bigger every day.

What do you think? Post a comment, or talk to me on Twitter: @mbrit.