HP Touchpad: The breakout success of the summer? Only at £89!

There’s always a market, it just depends on the price.

Sometimes it’s free. Sometimes you need to pay folk. Other times you just need to adjust the price a little.

It turns out that there is what us economists refer to as dramatic elasticity when it comes to tablets that aren’t named ‘iPad’.

Whilst nobody seems to think twice about spunking £399 on an entry-level iPad, everybody develops a brain freeze when it comes to any other brand. That’s partly because — in fairness — the majority of iPad competitors are utter tripe. Worse than tripe. Tripe with about a ton of shit squeezed in.

Witness, for example, the abomination of the Motorola XOOM. The hardware? Middling. The user interface? Traditional rubbish from Google.

I won’t even bore you with the 100-quid-shitters that are bordering on offensive to anyone with a technical mind. You know the ones — the half-inch-thick Android 2.0 specials.

[The PlayBook is a special case — that, I shall address at a later date]

Back to HP. It turns out that HP’s nano-brain senior management are on to a winner with the Touchpad. As retailers across the West are discovering this week, there’s actually huge demand for the HP Touchpad. Just, not at the iPad price.

Stick it down to £89 and everyone I know want’s one.

I’m not kidding. Everyone I know. And half of them haven’t ever tried WebOS. Half of them couldn’t pick WebOS out of a basic screenshot line-up. But they’ll all have an £89 16GB Touchpad.

If I’d had, say, 30 Touchpads in my hand this evening, I think I could have shifted every single one at £89. I’ll go further: I reckon I could have sold 100 via Twitter in about 10 minutes at 6pm this evening.

The Background

The neolithic incompetence of the HP board aside, here’s a quick primer: HP effectively announced the death of WebOS last week. Oh the OS may well be licensed. But hardware? No. Dead. If you own a Touchpad: Hahah. That was the message from HP last week. There were quite a few units sitting on shelves though. They needed to be cleared. Rather quickly over the weekend, rumours began flying of Touchpads being substantially discounted. News hit the UK on Monday evening, courtesy of a few tweets from the Dixons PR chaps. UK pricing has been ‘corrected’ (i.e. reduced-to-flog) at £89 for the 16GB Touchpad and £115 for the 32GB version.

The Results

As news was confirmed during the early evening, thousands of geeks lined up on the Dixons/PC World/Currys websites with their fingers poised. Although I had a meal to get to, I arrived at Bank in the Square Mile at 6.02pm and promptly flipped out the BlackBerry Bold 9900. [I wanted to give it’s browser some real-time in-anger usage]. I’m delighted to say that the new Bold’s browser handled my requirements brilliantly. Unfortunately when I tried to order the Touchpad at the new price, I got an out-of-order message.

Dang it.

Judging by the Twitter messages, some lucky people managed to get hold of one. MIR reader @bragbpenders managed to snare one. Numerous other readers and followers appear to be planning on actually visiting shops in the hope of picking up extra stock.

What’s this mean?

Fundamentally, it’s a statement by the wider market that the Touchpad wasn’t a complete dullard. It’s got some worth. Granted, at £89 (or $142) that’s only about half the estimated build cost. But it’s got worth. And lots of people are scrambling for the Touchpad at that price. Further, I don’t think queues are out of the question. Any retailer that announces a decent chunk of in-store stock is set to be besieged with people wanting a good deal.

Stick some of the Android abominations to £89 and, no. No thank you. I don’t want one.

Basic logic tells me HP and Palm got something right with the Touchpad — the price was wrong, but the basic product was right.

The future?

Ah dear.

I would have loved to have seen a balls-out strategy from HP. Come on, it could have been brilliant!

Let’s be clear: The tablet market is completely owned by Apple at the moment.

At the moment. There’s plenty of opportunity to innovate — and it doesn’t just have to happen on the hardware. Price is an important innovation point. Apple famously uses price to completely wrong-foot competitors. It’s done this brilliantly in the tablet market, with other manufacturers struggling to get anything out the door to match the iPad price — with a decent margin to boot.

Why not go the other way? Invest in the ecosystem. Invest in the market. Invest in the fact that you were fracking late to the party, but that you have a meaningful contribution to make: But that it’s going to cost you.

Wan Billyin Dollurz

So set aside a billion dollars. You’re big enough and you want the ecosystem. The only way anyone is going to pay any attention is if you own a section of the market.

Let’s get out the fag-packet and do some calculations.

$99 purchase price, right?

Assume HP is currently taking a $200 haircut on each one at this rate. But let’s aim for an 8GB Touchpad. Or perhaps even a 4GB. I think folk would still go for an 8GB one at $99. So if you assume the market is happy to stump up $99 for a Touchpad — and that HP would need to subsidise each purchase by, say, $150, how many could HP sell if it had a billion dollars to play with?

$1 billion divided by $150 is 6.6 million.

So HP could sell 6.6 million units.

Is there a big enough market for Touchpads? Arguably, yes.

Would folk be queuing round the block for them? Arguably, yes.

Would Western developer attention be re-tuned to prioritise or focus on WebOS? Arguably, yes.

6-7 million units is pretty good. That’s just over half of what Apple sold in 2010 (thanks Wikipedia).

So a billion dollars could potentially buy you into the tablet ecosystem.

Wikipedia reckons that in March there had been 15 million iPads sold. That isn’t much, is it? Not in the context of this imaginary 6-7 million Touchpads. As of today, Wikipedia reckons there have been 28 million iPads sold by the end of June 2011.

Could HP — with some clever pricing and some audacious nail biting accounting — find itself with a 25% chunk of the tablet market in 6 months? As this post at The Week points out, such a strategy would also more or less wipe out the other Android pretenders. Even the current fire sale could seriously damage the rest of the market:

3. Tablet pricing will be thrown in flux
The TouchPad may have been flawed, but its exit from the market at fire-sale prices may force other tablet makers to slash their prices, too, says Dignan. “It’s no wonder retailers initially balked at HP’s prices. If the TouchPad is ultimately worth $99, what’s an Android tablet worth?” If Google tablets want to really compete with Apple, they’re going to have to offer a much better price — $250 max.

I know there’s a lot of ifs. I just wanted to explore the possibilities.

It’s a big ask.

It’d cost way more than a billion of course. But it’d keep you in the game.

I had high hopes for HP. You never know, perhaps HP’s management might grow a pair and decide to get stuck into the mobile marketplace once again.

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9 Responses to HP Touchpad: The breakout success of the summer? Only at £89!

  1. Matt Radford August 23, 2011 at 8:12 am #

    As Gruber pointed out $99 isn’t a sustainable price – you can’t take a billion dollar haircut for ever, and once you’ve set the price, people won’t want to pay more. But $249 is still in the affordable range, and it’s the price that’s being floated for Amazon’s Android fondleslab… 

  2. Ewan August 23, 2011 at 8:35 am #

    Yes, it’s rather unsustainable, but you could build momentum that way. The first 10 million at $99, something like that.

  3. Russell Banks August 23, 2011 at 9:46 am #

    Its a very good point Ewan.  I was in Microsoft for the launch of Xbox 10 years ago and that was their approach.  They wanted to be part of the black box under your telly EcoSystem..They were losing over $250 per unit shipped, and I’d wager they aren’t making much if any money on the hardware today…..for them its all in the cut they get from the games developers……they created the ecosystem, subsidised it heavily and are reaping the rewards (in the gaming space anyway).  

    By the way if memory serves me right MS had a Warchest of $5billion (20 million Xbox units) set aside to “lose” on Xbox over 5 years…..if they werent making real inroads into the gaming market at that point they would have pulled the plug…. 

    #Disclaimer – I am a total Xbox FanBoi 🙂 

  4. bp101 August 23, 2011 at 11:18 am #

    Is this the strategy Amazon will take with Android tablets?

  5. Simeon Walker August 23, 2011 at 11:41 am #

    The trouble tablets is that netbooks cost 200 quid for more hardware. Tablets lack Windows, Intel and a keyboard but seem to cost double (I know that netbooks really aren’t very nice).

    Think I’ve placed a touchpad order, will have to wait and see…

  6. Ewan August 23, 2011 at 11:41 am #

    I think so.

  7. Ewan August 23, 2011 at 11:41 am #

    Oh good luck Simeon!

  8. Simeon Walker August 23, 2011 at 3:24 pm #

    Staples cancelled on me. Amazing how all these big retailers have websites that can’t handle a few thousand geeks after a bargain!

  9. Sam Machin August 24, 2011 at 7:37 am #

    I’ve been watching a few sites in the hope of picking up a bargin, had 2 in my basket at Dixons on Monday night but lost out due to the latency on my 3G connection and being on the train 🙁

    Ironically I think we may find a true price point for the touchpad in the coming days, £89 is clearly way under priced as demonstrated by the buying frenzy over the last few days, however quite a few of these are turning up on ebay and some of the amazon market place sellers haven’t been quite so aggressive in slashing their prices, looking at these 2 sites it seems like about £220 is the “going rate” at that price they are shifting but not as stupidly fast as at £89, and remember this is for an end of life product, this tells me that had HP launched at £249 they would have almost certainly been far more successful.

    Of course its not just the ideal price point for a tablet, it depends on the build quality, the Advent android slab is still struggling to shift at £199, but the Touchpad certainly felt like a mainstream if not premium product certainly above the Alibaba Budget stuff thats shipped out of China.

    If HP (or any other big name manufacturer) wants to try and buy into the tablet game my suggestion would be to take 100k units and have an auction, run the sale for 10 days or until you have 100k bids and at the end you should have a price the market is willing to pay for your product, admittedly you’d need things like some marketing first, perhaps even put some units into stores so people can get hands on but its a far neater way of finding your price point than taking a guess, failing then writing the lot off in a fire sale!

    I saw somewhere that HP is taking a 1Bn charge on shutting down the WebOS business already, costs of redundancies etc. so had they been brave and done this upfront they might have spent the same but had a viable future business…

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