HP backs into tablet, commodity device game: Can it win?

HP backs into tablet, commodity device game: Can it win?

Summary: HP is clearly on the Google and Android bandwagon with a new 7-inch tablet. That's great news for Google. Likely bad news for HP's profit margins.

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HP's Slate 7 is billed as "an affordable Android tablet" and clearly puts the company back into the tablet market. It's a bit unclear whether HP can win at the commodity device game.

The company is promising a Google experience with a Slate 7 that sounds a lot like the Nexus 7 from Asus. And that's the problem. HP is playing Android tablets and Chromebooks with moves that clearly align it with Google. It's not like HP had any other moves given its WebOS slate debacle and the limited traction of Windows as a tablet and smartphone platform.

Here's the rub: HP will sell the Slate 7 in the U.S. for $169. HP is hoping to sell services to protect their purchase with a two-year Care Pack for $29 and a $49 plan with accidental damage protection. On its blog, HP is touting the quality of the Slate 7 as a differentiator. 

hpslate7

 

Given it's unlikely that customers are going to buy a two-year replacement plan for a device that costs $169 we can assume HP's margins are really going to be thin. Despite HP's scale, it's unclear whether the company can match costs with Asus and other players who have been procuring tablet screens longer.

CNET: HP switches to Android for $169 Slate 7, phones planned too

You can almost guess what happens next to HP. You guessed it. Asus will have a $169 tablet. Perhaps there will be a $129 tablet. The race to zero is on and it'll stink to be a hardware vendor in that scenario. If Android tablets go cheap and commodity the only players that'll win are Amazon, which can subsidize a device with e-commerce, and Google, which will gain ad revenue.

HP will have to build an army of tablets because it has to---the PC maker has to be relevant in a post-PC era---but don't expect that strategic shift to help profit margins at all.

Topics: Tech Industry, Android, Hewlett-Packard, Mobility, MWC, Tablets

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12 comments
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  • 2 words

    2 words: emerging markets
    So far the nexus 7 is selling mainly in Europe and the U.S. and maybe Australia. I haven't heard any accounts of it being sold in India or Africa. If they can quickly step in there they can make a killing. Of course the only limitation might be selling through mobile network providers given that it's a wifi only tablet but even there i expect that they could sell though their normal pc vendors
    blackweaver
  • Aw

    Author doesn't like HP making non-Windows tablets. Too bad.
    symbolset
  • Good

    Nice to see the price of computing being forced down by competition. A win for the buyer.
    Alan Smithie
  • But That's Exactly How HP Became Big In The PC Business

    That virtuous circle of higher volumes leading to lower prices leading to higher volumes is exactly how the PC business grew as big as it has become and how HP became the biggest of them all.

    The difference is that PC margins dropped everywhere except in two places: the OS (monopolized by Microsoft) and the CPU (essentially monopolized by Intel). Those two companies continued to cream off fat profits, even as the margins for everybody else in the chain dwindled to peanuts,

    There is no equivalent to either Intel or Microsoft in the mobile business: the Android OS is free, and the ARM CPUs are available in huge variety from a whole bevy of freely-competing suppliers. This means that OEMs like HP should be able to hold on to more of the available margins for longer, as opposed to primarily enriching somebody else.
    ldo17
    • Except it has not worked out like that.

      There are profits for mostly Apple with decent share for Samsung. Mostly none for he rest.
      Bruizer
      • Except It Has Indeed Worked Out Like That

        Lots of profit to go round an ever-increasing number of entrants into a dynamic, still-growing market.
        ldo17
    • SO what you are saying is that

      Previously OEMs all paid the same prices for CPUs/Operating Systems through Intel/Microsoft and that did not allow them to make good margins.

      Now OEMs will pay the same price for the operatins sytem from Goolge (free) and CPUs from ARM manufacturers, but that somehow will enable them to increase margins?


      I don't think you quite get it.
      Emacho
    • These are not Thin margins?

      So at $169, you don't think they are still dealing with thin margins?
      No one is going to pay almost half the price of the device for a warranty.
      Just because Microsoft and Intel are not involved does not necessarily mean greater margins.
      thekman58
      • Re: These are not Thin margins?

        A darn sight better than losing money on every Windows PC.
        ldo17
  • HP making another mistake.

    I would't be buying anymore HP hardware for personal use, because HP's PC hardware is really disappointing in the last couple of years...
    Owlll1net
    • How come?

      Please tell me how a bad experience you had with a product means that releasing a new tablet is a mistake?

      I've had bad experiences with Apple (An ipod nano that broke right after the warranty expired) LG (cellphone on which I simply could not make phone calls sometimes)...etc...etc...

      Please leave a smart comment next time....
      alfredcast
  • Great device, great decision!

    I can't wait to have that one, looks just awesome!

    I guess it was just about time for HP to stop selling MS software. MS did not show any respect for all of its partners when they released the surface... so I guess there are the consequences.

    Android might not be as secure as W8...but with all the expertise HP has in this field...it will be able to provide great tablets for both consumer and enterprise markets...
    alfredcast