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

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.
Written by Larry Dignan, Contributor

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. 



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.

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