By Harry McCracken | Monday, August 22, 2011 at 11:50 am
Weird: By flopping so badly, HP’s TouchPad tablet has become a monstrous hit. After HP CEO Léo Apotheker decided to terminate HP’s WebOS hardware business, the company slashed the entry-level TouchPad, which sold for $499 just a couple of weeks ago, to $99. The new price is causing riots at Best Buy and has made the TouchPad the #1 electronics product on Amazon.
HP is now selling TouchPads as fast as it won’t make them. It’s a poignant end to a device that once seemed full of potential.
Are the folks snapping up TouchPads making an intelligent buying decision? It depends. HP says it’s not giving up on WebOS, and will continue to operate the WebOS app store and hold developer events. I’m not sure what the status is of any software updates for the TouchPad: it could certainly use some additional bug fixes and enhancements, but I’d be startled if HP poured energy into development of anything as ambitious as an iOS 5.0 or an Android Ice Cream Sandwich, at least while the fate of WebOS is so very uncertain.
What buyers of $99 TouchPads have probably gotten themselves are tablets that will feel largely frozen in time–good for fooling around with, but not rough equivalents of the iPad or Galaxy Tab 10.1 that happen to sell for 80 percent less. That’s fine, as long as the buyers understand the terms of the deal.
Some people are now wondering what would have happened in an alternate universe where the TouchPad sold for $99 (or even $199) from day one. Could HP have built up massive market share in short order, thereby gaining enough traction to get Apotheker excited? Would reviews (like mine) have been kinder if the TouchPad had been the same product as it was, but had drastically undercut the iPad’s price rather than matching it?
Probably. We don’t expect $400 Windows laptops to be as polished as $2000 MacBook Pros, after all, and there’s a thriving market for both. But I can’t imagine any rational scenario that would have involved HP selling TouchPads that cheap except to get rid of a defunct product.
iSuppli performed a teardown of the TouchPad and concluded that the parts inside cost HP about $300–assembly, marketing, and other costs not included, and without any profit margin for retailers. The more $99 TouchPads HP sold, the more dough it would have lost. And while it might have made a little extra money from TouchPad owners who bought apps from HP’s store, there’s no way it would have recouped the initial losses. (It would take selling a lot of 99-cent apps to cover $200 or more money lost on every new TouchPad sale.)
No, the only way that selling TouchPads for $99 makes sense is as an alternative to dumping them in landfill. HP may lose slightly less money this way than if the existing TouchPads had just quietly gone away.
Still, the fact that so many people are so interested in a tablet under $100 leaves you wondering how soon a tablet might arrive that costs that much from the get go, and how well it could do. Back in March of last year, chipmaker Marvell showed off a reference design for “Moby,” a tablet that it thought could retail for $99. As far as I know, no Moby tablets have shipped, at least at that price point. They’d be a lot more basic than a TouchPad or iPad, but it would still be intriguing to see how well a tablet could do at 20 percent of the iPad’s starting price. (The $250 Nook Color comes as close to testing this theory as any device currently on the market.)
We know that many people are intrigued by tablets. It’s probably a safe bet that more of those intrigued people aren’t willing to pay $499 than are prepared to do so. But the TouchPad fire sale–which probably appealed more to bargain-hunting gadget nerds than the masses–is such a bizarre event that it just doesn’t tell us that much about the potential market for very low-cost tablets.