Sunday, August 21, 2011

Editorial: HP TouchPad - Dead or Alive?

   With HP announcing that they are discontinuing the TouchPad and putting webOS on hold, Apple has claimed another victory against its competitors.  The TouchPad never had a chance against the iPad or the many Android Honeycomb tablets as it intended to compete in that higher-price market.  Having seen many tablets come and go since the first iPad was launched, a company claiming defeat after only 6 weeks on the market is the most shocking event I have witnessed in this still young tablet market.  What is even more shocking is HP's dramatic price cut ($99 for 16GB & $150 for 32GB)?  Whether intentional or not, we believe this is a good move.  Why?  Read on.

   The TouchPad was launched here in the US on July 1, 2011 with the intention to compete directly against Apple's iPad as evidenced by the introductory price of $499 for the 16GB version.  HP, which bought Palm a few years ago, intended to bring its webOS to a tablet.  One of webOS' biggest advantage is the ability to handle true multitasking functions, something that Apple's iOS and Google's Android still cannot do right.  I spent some time using the TouchPad and our thoughts are posted here.  The reviews on the TouchPad were mixed but sales were poor.  As we noted in our mini-review "As for the general consumer market, HP needs to lower its price as it is no match to compete against the similarly priced iPad or even the Samsung Galaxy Tab 10.1," pricing was the first nail in the coffin.  My personal belief is that tablet manufacturers need to consider what they want to accomplish.  If a manufacturer intends to compete on the same price point as an iPad, they better introduce the mother of all tablets.  It better have the fastest processor, sharpest screen, highest battery life, robust app market, etc.  If they cannot deliver on all these factors, manufacturers will need to compete on pricing.  Samsung's Galaxy Tab 10.1 is the iPad's best Android competitor in that price range.  HP had a few strikes against it: not well known OS (webOS); a weak app market; lack of full features (no expansion slot for memory, no rear camera, its heavy, etc.); and weak performance (according to reviews).  With these weaknesses, HP still believed their TouchPad was worth at least $499 and that consumers would gladly pay this amount.

   Throughout August, there were indications that the TouchPad was not selling well.  First, there was a $50 price cut which later turned to $100.  Second, earlier this week, Best Buy reported that it only sold 25,000 out of 270,000 devices that they ordered.  The 25,000 may actually be lower as it may not account for returns.  In any case, Best Buy was not happy and was refusing to pay HP for the tablets.  Apparently, HP sent a senior executive to meet with Best Buy executives to discuss this (and may be advise of their intentions to abandon the tablet).  Third, reports also indicated that only 12,000 were sold in Europe in the first month of the TouchPad's release.  With earnings being released this past Thursday, HP had to find a solution.

   On August 18th, HP announced that not only was it exiting the PC market but also killing the TouchPad plus not developing webOS any further.  Early adopters/buyers and webOS developers were stunned that HP was abandoning them. So HP pissed off their consumers, developers and retailers.  What was HP going to do now?  Well, they threw a Hail Mary.  Whether this was part of their strategy (after admitting defeat) or not, HP decided to reduce the price by 80%.  Suddenly, a decent tablet can be had for $99 which was not possible before.  Most eReaders cost more yet do much less.  HP had nothing to lose but dramatically reduce its price.  (Its being reported that the fire sale will cost HP $100 million.)  This, in my opinion, is a smart move.  Here is why:

  • As evidence by its success (sold out everywhere & at, the TouchPad & webOS will now be in the hands of several hundreds of thousand consumers (rumored to be over 350,000 but not verified).  It would be interesting to know how many tablets have actually been sold this weekend.
  • HP has now created a large demand for its tablet as people are looking everywhere for it. This may in turn lead consumers to purchase a HP printer (as one can print directly from the Touchpad to an HP printer connected to the same network) or at least create awareness of its product. 
  • Consumers are winners because those who had no intention of purchasing one or did not have $500 to spend on a high price tablet can afford to spend $99 on a good tablet.  I believe this is great for consumers and the tablet industry overall.
  • webOS developers are winners because now they have demand for apps that did not exist prior to the price cut.  webOS developers: please continue developing apps as people will be looking for them.  Consumers: support the developers. Buy their apps as long as they are good.
  • Retailers may be winners.  Not sure what the agreement is now in place but I assume HP will provide a credit for the price difference between what the retailers paid for the TouchPad versus the reduced price.  With the thousands of new TouchPads sold, demand for accessories will be there. 
   This will hurt manufacturers that are introducing low-priced tablets as they will not be able to offer the same quality tablets for that $99 - $150 price range.  We hope that HP will view the TouchPads being sold out as a sign to continue developing webOS and perhaps continue to support the TouchPad.  HP can use the TouchPad as a loss leader to make profits on the backend (cut of the apps sold through their App Catalog and/or accessories).  It is possible after all the numbers are crunched that the TouchPad will be second best (or at least third best) selling tablet in 2011.  HP can claim that partial victory that others cannot (besides Apple of course).

   According to a tweet, the developer responsible for porting CyanogenMod (Android ROM) to the Nook Color will be working on porting Android to the TouchPad.  If this is possible, the consumers are really the true winners although webOS will take a hit.  Even if it is not possible, the TouchPad is still alive for now with webOS which is a great OS. Support the developers so more apps can be created. 



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