HP to make one last TouchPad production run

Just a couple of weeks ago, nobody wanted the HP TouchPad. After HP stopped making the webOS-based tablet because of low sales, it sold its remaining stock at highly reduced prices. After that, the tablet suddenly became the most sought after consumer electronics product in recent memory. Now HP has indeed confirmed that it will be going back to make one last batch of the HP TouchPad, but once these tablets are gone, they are gone.

In a post on HP's blog site The Next Bench, HP spokesperson Mark Budgell said, "Despite announcing an end to manufacturing webOS hardware, we have decided to produce one last run of TouchPads to meet unfulfilled demand. We don’t know exactly when these units will be available or how many we’ll get, and we can’t promise we’ll have enough for everyone. We do know that it will be at least a few weeks before you can purchase." In the newly updated FAQ about the TouchPad's future, HP adds, "We can tell you that HP’s Small and Medium Business team has sold out of HP TouchPads and will not have more inventory."

One thing that the FAQ doesn't answer is what price HP will set for this final batch of TouchPads. The recent sale frenzy was generated because HP cut the price of the 16 GB version of the tablet down to just $99 from its original $499 and the 32 GB version down to $149 from its original $599. We suspect that many people might get upset if HP raises the prices from those super-low levels.

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This will be totally Useless, since it only sold at all because of the Firesale. When they make new ones, they will be back up at a high price and unsold.

Tartan said,
This will be totally Useless, since it only sold at all because of the Firesale. When they make new ones, they will be back up at a high price and unsold.

I'm sure they will be priced the same as the ones that went on sale.. wouldn't make any sense to do otherwise. HP is still making a profit otherwise they wouldn't look at making more.

The only reason I would like to get a hold of one, at the discount price, is because as we speak the moders have already begun getting Android to work on the TP. It is pre-alpha at this point.

Tartan said,
This will be totally Useless, since it only sold at all because of the Firesale. When they make new ones, they will be back up at a high price and unsold.

sava700 said,

I'm sure they will be priced the same as the ones that went on sale.. wouldn't make any sense to do otherwise. HP is still making a profit otherwise they wouldn't look at making more.


HP sold them at a huge loss: rought estimates put the device at roughly $400 to manufature, market, and get to stores not including the billion dollars they paid for the software that runs on them.

Their thinking was "this product isn't taking off, get rid of the excess inventory now so we don't have it clogging up the channel/warehouses/etc and sitting our our balance sheet. Once the product is gone, try and sell the entire idea to somebody else to be rid of it forever".

This whole stunt cost hundreds of millions of dollars and it isn't apparent how any good will come of it.

what I don't get is that HP and other companies don't seem to realize the success to their products (well tablets) will come down to price.

People may say and most people believe (whether it be true of false) that Apple has an over all better product, a better UI and the eco-system to back it with lots of quality apps, thus why people will pay a premium for their tablets (plus apple know how to market their products).

BUT a lot of people would like tablets to replace their laptops to just surf the web and play casual games which you can do on of the many other tablets currently out there, where these other tablets they fail is their price, this what consumers want a quality product but for a lower price, as long as they price match Apple people will say "why should I get a Samsung/Blackberry or Motorola tablet when I can get an ipad for the same price?"

I bet if Samsung, Blackberry or Motorola sold their tablets at a cheaper (significantly) price they would see increased sales.

This is why I don't understand why HP just didn't lower the price and keep up production of their tablet instead of killing it off.

The proof is right in front of them!

Richard Cousins said,
what I don't get is that HP and other companies don't seem to realize the success to their products (well tablets) will come down to price.

People may say and most people believe (whether it be true of false) that Apple has an over all better product, a better UI and the eco-system to back it with lots of quality apps, thus why people will pay a premium for their tablets (plus apple know how to market their products).

BUT a lot of people would like tablets to replace their laptops to just surf the web and play casual games which you can do on of the many other tablets currently out there, where these other tablets they fail is their price, this what consumers want a quality product but for a lower price, as long as they price match Apple people will say "why should I get a Samsung/Blackberry or Motorola tablet when I can get an ipad for the same price?"

I bet if Samsung, Blackberry or Motorola sold their tablets at a cheaper (significantly) price they would see increased sales.

This is why I don't understand why HP just didn't lower the price and keep up production of their tablet instead of killing it off.

The proof is right in front of them!

Because the Touchpad costs $320 in material costs per unit. Add in overhead, distribution, labor, R&D...etc, I would be shocked if HP turned a profit even selling these at $400.

Once the flood of devices are out there...they should stay in the market, people will start seeing them more and more as a result and be intrigued.

What about other webstores? Will they get any HP Touchpads to sell?
I live in Greece I would like one but HP does not ship to Greece whilst other stores do.

MrPink said,
They should really start making it again at a much lower price than before. $199 would be a very good price.

They'd easily make losses back through an app store model at this price point. They'd sell like wildfire and developers would flock to make apps due to the popularity and cheapness.

_DP said,

They'd easily make losses back through an app store model at this price point. They'd sell like wildfire and developers would flock to make apps due to the popularity and cheapness.

Apple's margin is 30%, other app stores are in a similar price range (XBLA can be upwards of 50% for example).

Let's assume HP manages to get an unprecedented 100% margin going: developers just give HP their applications and let them keep all the money with the only condition being they sell for the same price as their iPad versions. Let's also assume they manage to become as popular with customers Apple's store (which remains the most popular one to date), and further assume that each developers and publishers are prepared to to take no profit but are happy to produce an application selection as rich as it is for iOS. Basically, remove any reason for anybody to go to the dominante platform with a bunch of handwaving.

If you believe the bill of materials cited by iSuppli, HP needs to make $320 per Touchpad just to cover the electronic bits inside it. They'll also need to amortize the billion and change spent on WebOS, advertising, shipping, etc. Of course a $200 retail price means that either HP isn't taking any profit, or the retailer isn't. Even in our fantasy world I think it's unlikely walmart would be willing to give up their 15% margin on retail products (after all, they've got employees to pay and electricity bills) so that leaves HP trying to recover an extra $30 per touchpad.

$320 - $170 (HPs take from retail sale) leave $150 to make up in app purchases.

In order to make that up in our fantasy world where HP makes > 300% more profit per app than Apple: they'd have to sell more than the touchpad is worth just to break even on the hardware. That's a lot of copies of AngryBirds, and a lot of developers making $0 on their applications.

But then you have the extra expenses: a hundred million or two in losses on the initial batch of touchpads, a billion and change for webos as it is today, a billion or more to bring it up to, and keep it at competitively levels with android/ios/windows in the short-term future. Marketing (several hundred million spent to date, and several hundred million more in the future), paying the salaries of the people who build the thing, tech support, electricity for the head office…It's not unreasonable to think HP would need to make up 3 billion dollars just to not lose money. That means HP would have to sell more applications than Apple has to date just to make up the loss they've already picked up. Then do it again for any new Touchpads they ship.

To date, for both the iPod, iPad, and iPhone applications Apple has turned around 4-billion dollars over ~4 years. So start start adding things up.

Is there any reason to assume HP customers are more likely to buy Applications than Apple customers? I don't have any reason to think they would (in fact, I'd argue they're less likely to: Apple's customers tend to be wealthier than HPs) but let's assume parity.

HP doesn't have any other devices to sell WebOS applications for so they'd need to have at least as many Touchpads sold as Apple has iPads, iPod Touch, and iPhones. Let's assume HP doesn't care about the huge install base Apple has already and only wants to keep up (though if the do that it delays making a profit by 4 years). Apple is going to sell around 90-100 million iPhones in 2011 (they've already sold 60 million, the christmas quarter is always their best by far). Apple will sell around 30-40 million iPads this year (last report was march at 30m). According to Apple, the iPod Touch is about half of all iOS devices -- so that's another 100 million of those this year.

Add it all up, HP needs to move 250 million touch pads this year to keep up with Apple, at $175 up-front loss per device, that's 38 billion dollars.

The HP systems group (PCs) operates at on just less than 6% profit margin and had 8.8 billion. Looking over the last 4 years it seems like that division averages around a bit less than half a billion in profit per quarter.

Once you factor in the amortized costs of webos, marketing, sunk costs on the last round of touch pads: your proposal would cost a century worth of HP's personal systems group's profit. In exchange for that: they'd sell as many touchpads as apple will sell by christmas, then hope that their app store is 1250% more successful than Apples (4x more app sales, 330% more profit). Doing all of that means they break even: they lose no money.

Even if by some miracle they pulled that off this year: what's the long term strategy?
Do it again next year? That's a lot of work and impossible luck just to come out with nothing.

Alternatively, they could sell their entire webos tablet business to some sucker for $2 billion and a big mac. At least that means they'll get a sandwich out of their efforts. Although you have to wonder who'd buy it at this point.

Edited by the evn show, Aug 31 2011, 10:10pm :