Cheap tablets no sale, HP TouchPad not representative of the market

Cheap tablets no sale, HP TouchPad not representative of the market

Summary: Companies looking to compete with the iPad have vainly looked for the magic bullet to use with their tablets. Contrary to what we saw with the TouchPad, a $100 price is not the primary factor.

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The group of companies trying to make an iPad competitor may have learned a bad lesson from the HP TouchPad cancellation and subsequent sell-off. The lines at stores to get a $99 TouchPad and high-volume sales online may convince OEMs that cheap is the feature to garner big sales numbers. I hate to burst their bubble but I do not believe that is the case.

The TouchPad situation was unusual and should not be used to form strategy for other products. Folks went crazy for the webOS tablet not only because it was a mere hundred bucks, but because they knew the TouchPad was worth far more. HP didn't set any sales records at the $500 price at launch, and the $100 frenzy was due to customers realizing it was worth far more than the fire-bin selling price. The TouchPad is a good quality product for $100, and buyers knew that, thus the frenzy.

The fact is there have been cheap, even $100 cheap, tablets for a while. They had unfamiliar product names on them, and they sold in places not known for quality merchandise. Fact is, they were terrible tablets, not surprising for such cheap devices. They haven't sold in any numbers either, and quietly disappear as soon as they arrive on the market.

No, the reality is that buyers clamored to buy a cheap tablet from HP because of the company's reputation for products. HP is a brand familiar to everyone, and that instills a sense of reliability with folks. Once the price was dropped so low that everyone knew HP was selling it at a big loss, thus it was a great deal, and we saw a TouchPad buying frenzy.

Not because $100 is the magic selling price for tablets, but because in the case of the HP TouchPad $100 was an outstanding deal.

Topics: Laptops, Hardware, Hewlett-Packard, Mobility, Tablets

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32 comments
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  • DUH. and the sky is blue.

    Obviously the $100 price point is only good if it is a quality product. However, If the Motorola XOOM sold for $299 or better yet $249 they would sell lots of them. HP should keep producing the TouchPad and sell them at a loss and make it up with sales from the WebOS store. Get 10 million devices out there and the software developers will show up to make your money back in a hurry.
    condelirios
    • RE: Cheap tablets no sale, HP TouchPad not representative of the market

      @condelirios
      +1. It doesn't have to be at $99, they could gradually raise it to $349 and that way they could minimize the losses and get into breakeven with the WebOS store and they should work with Microsoft and other software shops and content stores to build the ecosystem, and they could walk the device towards profits.
      Ram U
      • RE: Cheap tablets no sale, HP TouchPad not representative of the market

        @Rama.NET

        How would buy it? After a few price increases, people would stop. "Why would I pay $300 for something that sold for $200 a few months ago?"

        Few would go for this.
        dhmccoy
    • RE: Cheap tablets no sale, HP TouchPad not representative of the market

      @condelirios I agree, the XOOM is one solid Tablet and it still sells out places when they get them... If they did hit $349 it would be a killer Tablet!
      slickjim
    • RE: Cheap tablets no sale, HP TouchPad not representative of the market

      @condelirios <br><br>The WebOS store will not make anywhere close to what's needed to cover the lost of the TouchPad. Losing $200+ per device? If we are to follow the Apple model which HP/Palm was following, it is the hardware that needed to bring in the revenue, not the app store. The App Store is the loss leader.

      That failed because of bugs and slow bulky hardware. <br><br>What they should do is release new slimmer sexier version 2 instead of running away from the market. Fix all the bugs and problems reported, and price it around $299. WebOS has tremendous potentials but HP need to do what we all expected them to do, and that is to provide the financial backing for it to succeed.
      dave95.
      • How many millions will that take?

        @dave95.
        "What they should do is release new slimmer sexier version 2 instead of running away from the market."

        Redesigns aren't free. It will cost millions, tens of millions, probably hundreds of millions to create a tablet that can compete with the iPad 2 and by that time, the iPad 3 will be out, starting at $499. And HP has to pay more for every transistor, every chip, every LCD panel than Apple does because Apple can buy those components in the 10s of millions instead of the 0.1s of millions. A supplier would be crazy to offer HP the same price they offer Apple.

        "HP need to do what we all expected them to do, and that is to provide the financial backing for it to succeed."

        Why should HP do anything of the sort? Why should HP lose hundreds of millions of dollars just so consumers can have the illusion of choice? That's ridiculous.

        No one can afford to compete head to head against Apple in the iPad market (and it is the iPad market, there is no tablet market). It's over. Apple won.

        HP's best hope, quite frankly, is to become a Windows 8 slate OEM for the portion of the population that wants something between a tablet and a laptop although I don't see that happening. I think HP is gone from the computing device market.

        "WebOS has tremendous potentials"

        No it didn't because it doesn't have the iTunes ecosystem. It was DOA and always will be DOA because of that. Just like Android is DOA. So is the RIM Playbook. None of them can do anything better than the iPad 2 and none of them can interact with iTunes or the hundreds of thousands of iOS apps.

        It's over.

        Apple won.

        We all lose.
        toddybottom
      • RE: Cheap tablets no sale, HP TouchPad not representative of the market

        @toddybottom

        It wouldn't cost that much more to create an iPad2 level product at this point. The secret to how they did it is out and the basic parts are available from suppliers.

        HP should go invest in webOS, because the alternative is that they lose at everything. They lose the hardware game (they've already admitted as much by saying that they are getting out of the computer business all together). They lose at the software game (they can't compete with Oracle). They lose at the services game (they can't compete with IBM). They have printers and I don't see that going anywhere.

        With webOS, they had the opportunity to build something similar to Apple especially because they are starting out with a better operating system. Would it happen today? No. Would it happen in five years? Quite possibly.

        I was the first to laugh at Microsoft for attempting to create a video game machine as nothing could compete with Playstation. The Xbox does quite well now.
        bmacfarland
      • RE: Cheap tablets no sale, HP TouchPad not representative of the market

        @ toddybottom <br><br>How many millions did Apple spend in R&D for the iPad? They took a big risk on this device buying up chip companies PA Semi and Intrinsity. Spent millions more on Samsung and other part makers. Millions on assembly plants for the iPad. And this was all before the iPad was ever released. Apple took a chance and spent millions before they saw a single sale of the iPad. All HP have to do is follow Apple's blueprint and invest in a multi-year plan for the TouchPad. Sales will be low the first year or two but if they stick to it (XBox) it will pay off at the end in revenue and or brand recognition.
        dave95.
      • You didn't answer the question

        @dave95.
        "All HP have to do is follow Apple's blueprint and invest in a multi-year plan for the TouchPad. "

        I addressed this above: Why should HP do anything of the sort? Why should HP lose hundreds of millions of dollars just so consumers can have the illusion of choice? That's ridiculous.

        "How many millions did Apple spend in R&D for the iPad? They took a big risk on this device buying up chip companies PA Semi and Intrinsity. Spent millions more on Samsung and other part makers. Millions on assembly plants for the iPad."

        We could argue on how big a risk Apple actually took. While iSheep do not explain hundreds of millions of sales, the truth is that if Apple put out a total piece of cr@p, they would still sell a couple million units to the iSheep that do exist. Apple is also far bigger than every single other company out there so risking a few million is a fraction of 1% of their available cash on hand. To others, risking a few million is a significant investment. Finally, do you have proof that Apple had to build assembly plants for the iPad? While the Foxconn deaths were in the news, we kept hearing from the Apple faithful that it wasn't fair to blame Apple for this because iDevices were built on the same assembly line as devices from lots of other companies. Are you telling us now that those Apple faithful were lying?

        If I were an HP investor, I would be furious for HP to waste any more money on this fool's errand. It reminds me of video games where the bad guys are walking down the hallway and they can see 50 dead bodies at the bend in the hallway in front of them but that doesn't make them stop to think that maybe I'm sitting there with a big gun mowing them down as they meander past. Any smart investor should see the pile of dead companies that tried to compete against Apple. You can't do it. Apple is too big, too strong, has too many sweetheart deals with suppliers, and has an ecosystem that cannot be competed against.

        It's over.

        Apple won.

        It's a sick market.

        We all lose.
        toddybottom
    • RE: Cheap tablets no sale, HP TouchPad not representative of the market

      @condelirios

      Won't work. You simply won't make enough selling apps. Apple runs the App store at break-even. How can HP do it better with fewer apps and bigger losses per device. Their current loss cost them $100m dollars. And remember, they are spending $10b of $13b on the Autonomy purchase. If their current 250k costs them $100m, how long before they are broke?
      dhmccoy
  • your wrong

    mr kendrick your wrong
    Its because its 100$ that they sell its because at 100 its 100 less than the crappiest chinese clone .....

    the Hp hardware is good the touch screen is good and as a communication device/book reader/movie player its a hit should they keep on selling it people will keep on buying it period ....
    Quebec-french
    • I believe he said exactly that

      @Quebec-french

      As he stated, for 100 dollars people are receiving a 500 dollar tablet.

      With the "cheap" Chinese tablet selling for 200 dollars, people are receiving a 100 dollar tablet.

      :|
      Tim Cook
  • They bought a tablet cheaply

    But it wasn't a "cheap tablet". It was a good quality and rather expensive tablet that HP was, quite literally, subsidizing your purchase to take it off its hands.
    oncall
  • I should hope not

    I seriously doubt that very many companies were in danger of learning the wrong lesson from these events. Anyone who has even a passing acquaintance with roughly how much things cost to produce knew exactly what was going on, knew that it was a fire sale, and knew that it's not sustainable as a business.

    The only people fooled -- and there were quite a few on ZDNet -- were the sort who imagine that these things are being built for $30 or $50 and sold for $500 because of greed.
    Robert Hahn
  • What I want to know is where would HP

    make's it's money? In theory it would continue to sell their tablets at a loss right? So then what? Does HP have a ecosystem or would it have to spend time and money to develop one? If then what? That has been done so far by Apple but each company including HP will have to risk a lot of money and time to try to build it's own ecosystem. Also what of developers? Will they include HP or will they develop Apps and skip HP trying to make as much money as possible? So selling the tablet at a loss is bad enough but there is certainly NO promise that even then HP would be make it work... In fact I would think the risk is fairly high they would not.<br><br>Pagan jim
    James Quinn
    • RE: Cheap tablets no sale, HP TouchPad not representative of the market

      @James Quinn Yes they do, they have Apps and Movies at the moment and would likely build books into their armory.

      Now if they got 10,000,000 of these on the Market it would start to profit for them but I doubt they are that committed. I don't think they would lose money on a single Tablet but they wouldn't make money either with only 2 Million on the streets.
      slickjim
      • RE: Cheap tablets no sale, HP TouchPad not representative of the market

        I think the "make it up on apps and movies" theory fails the sanity test. Estimates are that HP lost about $200 per unit selling the TouchPads for $100. Suppose they get an app store, the apps are priced at about $5 each (roughly the same as iPad) and HP gets the same 30% cut that Apple gets. So they get $1.50 per app. To make the $200 back, they need to sell 133 apps per tablet. Not gonna happen.<br><br>Movies are worse. We know from peeking at Netflix' financials that the margin on movies is around 14%. Amazon rents moves as cheaply as $1.99 and most are $3.99. So we're talking about making 42 cents per movie. To get $200 back on movies, the buyer has to rent almost 500 movies.<br><br>"Make it back on apps and movies" is not a sustainable business strategy.
        Robert Hahn
      • MAybe if you are Apple

        @Peter Perry

        But even then. OK a conservative estimate for the losses of getting 10 million Touchpads to market @$99 is about $2 billion. After that, let's say they actually do capture a good rate of 30% for everything sold through the tablet. That means HP would have to sell approximately $6.8 billion dollars worth of stuff, or $680 in apps/movies/books per Touchpad, before it even broke even. And I am even being extra generous in assuming the actual costs of setting up and maintaining such a massive online store is ZERO when we all know a lot of that 30% is going to be eaten by operating costs. Heck I don't think Apple even comes close to seeing those kinds of aftermarket sales from its devices.
        oncall
    • Even a broken clock is right twice a day

      @James Quinn
      and you are the biggest broken clock on ZDNet.

      Still, even though you are an uneducated idiot, you happen to have typed something true.

      HP was smart to leave the tablet (oops, I mean iPad) market.

      "That has been done so far by Apple but each company including HP will have to risk a lot of money and time to try to build it's own ecosystem."

      No investor in their right mind would allow a company to risk their profits competing against Apple. It is suicide.

      It is a sick market.

      We all lose.
      toddybottom
      • You are insulting and pessimistic.

        @toddybottom .. An interesting mix. Must be a real lot of fun at a party:) Granted Apple has an impressive advantage, but things are not done yet by a long shot. Even "IF" Apple leads the market like it did iPods or simply has a good solid money maker with the iPhones but NOT the lead others will do what they do and make competition. They will compete on "Features" and "Price". Android will likely get into a similar "Price war" conflict with it's many tablet OEM's like it is presently doing with it's Android phones. Amazon is working on it's own ecosystem or already has one not sure... Don't use it. Samsung might do it ... If they are smart. MS should consider it for it's tablets or give someone some held in creating an ecosystem for Windows tablets? There are many a way people can make money on tablets Apple has proven that there is at least one... I think their can be more. Think different does not work just for Apple you know:)

        Pagan jim
        James Quinn