We’re living in crazy times, that’s for sure. Less than two weeks ago, HP announced it was going to quit making webOS devices. To get rid of existing stock, HP drastically cut the price of the TouchPad to a mere $99 – and this has resulted in a massive run on the device. Lines formed everywhere, and the device is now completely sold out. So, HP has just announced it is going to… Build an additional limited run of TouchPads.
Sales of the TouchPad have been stellar – the combination of top-notch hardware and the insanely low price has ensured lines outside of stores that carry the device. It’s so crazy, that the TouchPad is en route to become the world’s second-best selling tablet (far behind the iPad, of course).
This has prompted HP to announce its intent to produce another run of TouchPads. HP made the announcement on its blog. “Despite announcing an end to manufacturing webOS hardware, we have decided to produce one last run of TouchPads to meet unfulfilled demand,” writes HP’s Mark Budgell, “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.”
This is just crazy. I’m trying to come with an analogues technology product which was also canned, rose in popularity, and then brought back to manufacturing to meet demand. I’m sure it happens with popular product which get canned – but unpopular products? I’ll be glad for any examples you may have.
All in all, this just illustrates that there is a market for cheap tablets – it’s just that the current crop of cheap tablets are silly devices with resistive touch screens; not even close to the kind of quality the TouchPad delivers. It also makes you wonder if Apotheker ever had any plans to continue the webOS business; you’d think such a large company employs market experts who know about pricing and such.
For those of you who missed the $99 fire sale – you may get another shop in a few weeks. And you know what? Even if webOS will no longer be supported – Android is on the way.
Seriously, not hard to believe PSG is the least profitable group at HP.
A few years back, I had a sales rep at our company come to me for authorization to book a large deal below established margin thresholds. I took a look at the deal, pointed out that the pricing the customer was demanding was $10K below our cost so we would be losing money, and she replied that was ok, she needed the revenue for her quota. Boggles the mind.
So, I’m sure people are going to be shaking their heads and wondering how HP plans to make a profit off “volume losses”…
The current speculation is that they have many spare parts and/or manufacturing contracts that they’re already committed to – and rather than throw these away (and possibly pay a huge fee in hazmat recycling costs, etc.), it makes more financial sense to use the remaining stock to assemble/build more units and give people a chance at having one to recoup some expense that has already been realized anyway.
It also gives webos app devs a few more devices to potentially eek some revenue from
Edit: Damn, missed!
Edited 2011-08-30 21:34 UTC
Wasn’t that a joke: we loose on each item but gain on volume?
In any case, seems like somebody at HP thinks: So they laugh at us. Well, then, let’s make them *really* laugh. If life gives us lemons …
checking to see if Carly is still running things :p
Carly fostered a lot of bad morale… but nothing like this… insanity!!! Interesting days lie ahead for sure….
Yeah, I’m thinking someone evaluated the situation and figured if they could sell another batch at $150/ea it would save HP money on the shutdown due to contractual obligations and part orders, too…
–The loon
Are there any devs left? I thought Microsoft bought all 1000.
Edited 2011-08-31 13:16 UTC
Last I looked, a developer doesn’t immediately lose knowledge when switching platforms
If the demand is there, devs will fill the gap, trust me.
I’m also pretty certain 10s of thousands of technical people just acquired touchpads on the cheap – expect a new wave of apps as they start fiddling.
i’m sure they would make a profit on each device if they sold them exclusively through their onlinestore for 150$
lowering the price through cutting out the middleman
I’m really speechless… I don’t know if it a master play or a complete dumb thing.
And it seems that they are going to keep the $99 price. And keep saying that WebOS is discontinued.
Is HP loosing money? Is it an strategy to get WebOS to gain more value?
Obviously that there is something with WebOS that we don’t know yet. Possible HP is trying to get the WebOS market more interesting for the one that is going to take over WebOS.
Please, post your theories.
Sorry for the off-topic comment but this sentence caught my eye: “Even if webOS will no longer be supported – Android is one the way.” Can someone break it down (syntactically) for me? I’ve understood what Thom meant (that TouchPads can also run Android which is still supported) but the syntax is new to me.
I assumed it was a typo, and meant to read:
“Even if webOS will no longer be supported – Android is on the way.”
May be wrong though, but that was how I read it.
That’s probably what was meant – and considering I saw this yesterday, I think it’s pretty much correct:
http://www.pcmag.com/article2/0,2817,2392026,00.asp
BTW, Multiboot FTW!
If I was shopping around for a buyer for my WebOS ecosystem I would rather sell the business with 1.4 million users than 980,000 users. I have no idea what the numbers actually are, but more is better. And if you’ve ever used a webOS device, you know it’s fun, unique and you will brag a little about how nice webOS is. So the webOS ecosystem gets a value double kick for each device in use.
I remember them announcing at one point that there was going to be a 3G or 4G variant of the Touchpad before the fire sale. I am curious to know if any of those have already been manufactured and/or if this extra batch going through manufacturing is (or was meant to be) the 3G/4G variants. Perhaps they had a standing order to build the 3G/4G variants and due to contracts had to fulfill it but now have decided to just manufacture wifi versions instead. I don’t know much about manufacturing so I am just speculating.
Regardless, I would shell out some extra cash for 3G/4G Touchpad.
HP is still advertising on their website a 4G version coming soon powered by AT&T. Of course, that’ll only happen if they decide to keep them around.
Are they going to sell these newly manufactured units for $99? Problem is, the same people who bought up a load of them to resell at a higher price will do the same again, unless the retailers limit customers to buying only 1 unit.
I really don’t know if this is someone’s master plan or some VP’s last-ditch effort to get recoup some losses for their manufacturing and raw materials investment.
Doesn’t really matter: regardless of the outcome, management get their bonuses.
A perfect example of the old adage, “There’s no such thing as bad press”.
When looking at ebay sales of new 32gb touchpads I’m seeing more and more auctions finishing at $300+. This is $25 more than last week. And the volume or number of units selling per day were too many for me to bother counting.
So there’s a $300 market for Chevy like ipad alternatives.
What HP should do is continue to sell the hardware as a loss leader and make money from app sales. In other words the same business model it uses for its very profitable printer business where it makes money from cartridge sales but sells printers at a loss. It’s also the same model adopted by console makers like Sony.
http://penny-arcade.com/comic/2011/08/01
What you’re suggesting is completely impossible, like a car dealership giving away the cars and making all their money on what the increased foot traffic brings to the candy machines by the entrance. HP is eating about $200 on every TouchPad they sell at the firesale price. If they took the industry-standard 30% cut on app sales, each of their customers would have to spend $667 on apps, or about 222 apps averaging $3 each, just for them to break even. Of course no one has ever done that, and no one ever will. Besides, apps don’t come anywhere near averaging $3 each, in large part because most apps are $0 (and actually cost the vendor money in hosting expenses: $0 price * 30% cut = $0 revenue – miniscule hosting cost = negative profit).
http://www.informationweek.com/byte/news/personal-tech/tablets/2310…
And if they only lost, say, $20 per unit instead of $200 ($67 on apps, nearing remotely plausible territory) there’s no guarantee the much smaller price advantage to an iPad would be adequate to convince buyers to choose their alternative.
Advertising is a dead end as well; Google makes less than $10 per Android user per year in ad revenue. If HP can hit that number, they’ll have to squeeze an average 20 years of TouchPad use out of each buyer, again just to break even (in unadjusted dollars, over a period of twenty years). Also, HP has no advertising framework or experience, so that’s more money on the table.
http://www.readwriteweb.com/archives/analyst_each_android_user_will…
Meanwhile, if they’re not maintaining 0% failure, return, and warranty claim rates, they’re back in the hole.
The only other avenue left is carrier subsidies, but that hasn’t sold any Xooms. There’s no evidence that consumers accept the value proposition of expensive data contracts to have tablets online during the small gaps between home networks, free WiFi at coffee shops and McDonald’s, and smartphones with WiFi hotspot tethering. Business users might be a different story, but if their priorities are significantly different, it’s only evidence that there aren’t many of them buying.
http://ipadmodo.com/12198/ebay-ipad-2-sales-data-released-65-percen…
The way this market works now and for the foreseeable future, if you’re not making the money up front, you’re not making any money.
Nothing is said of the price of this next batch though. Could HP actually be so dense as to think that people flocked to the Touchpad because of its virtues and not due to the $99 price? I wouldn’t be surprised if they try to sell this next batch for significantly more than the fire sale price.
Edited 2011-08-31 02:15 UTC
shame they can’t sell ink or toner for the Touchpads.
ink is called app on tablet (like someone above mentioned).
I bet they are making a small profit at 99 dollars for the 16gb model. This stuff has a HUGE markup.
are they going to sell them at 99 dollars again?
I can’t help. Looks like Bradley tries to pull Leos leg with the TouchPad production. And if Leo doesn’t care, Todd will stand up and tell us: “Well, the TouchPad sold incredible good, we don’t have inventory and production is behind. Because of the good reception and the groth in market share, we will continue the product.”
This is a battle between Oracle haters like Leo and Ray. And managers that still have a mind. And Leo Apotheker and Ray Lane don’t care about HP as long as they can offend Larry Ellison. That’s their profession. Nothing else.
A) While they could just dump them and write them off for taxes, the disposal fees are probably more than shipping – whatever they get from the sales.
B) They want to sell WebOS to another company, and by doing this, they have created a 200,000 user global market that they can also sell.
C) As said above, they are probably still getting parts to build more, so they still have to deal with reason A and B some more.
I’m pretty sure they are losing tons of money on this, but the money is already gone. They are just making lemonade out the lemon they got with Palm and this TouchPad.
If you want a really good example of a product being canned, rising in popularity and subsequently being brought back, check out Coke2 on Wikipedia.
*Comment deleted as the author of said comment was too stupid to makes sure the comment was being posted under the correct article. Move along. Nothing to see, folks.*
Edited 2011-08-31 15:59 UTC
I’m not sure I trust the teardown costs. They list 1GB mobile DDR2 as $26. However I can buy stick of 1GB DDR2 800 for $13?
/edit
My guess would be closer to 230$ BOM for the Touchpad.
Edited 2011-08-31 16:08 UTC
Thom, you are such fanboy…
terrible.
Edited 2011-09-01 06:39 UTC
Commentators often equate “even if webOS will no longer be supported” (what Thom wrote) to “webOS will no longer be supported” or even “webOS is no longer supported”…
As of now, webOS is NOT discontinued, TouchPad users will received OTA updates. The question is how many and for how long, but the software team is still in place and OTA’s have been promised.
As of right now, the crazy thing is that there are more webOS tablet users than there are Android tablet users. With the pricing of the TouchPad, it is likely that users ready to pay $500 or more for a tablet will continue to buy iPads, whereas users not willing will turn to TouchPads as long as they’re available on eBay for half that price. Why buy an Android tablet when for the same price an iPad has all the Android tablet has but so many more apps?
So for this Holiday season, unless someone manages to produce much cheaper ($300 or less) but good (TouchPad level) Android tablets, it’s going to be an iOS or webOS.
As for apps, I can tell you that the 100+ 3D games I downloaded on my TouchPad are too many for me to sort through, and overwhelm my kids…
Right now, the Android tablet market has not been able to take off, because there is no compelling argument to not buy an iPad instead. At $99 (or even $250 on eBay), the TouchPad has that made that argument.