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HP's $99 TouchPad Fire Sale Can Teach Everybody A Lesson

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Re: HP's $99 TouchPad Fire Sale Can Teach Everybody A Lesson

#11

Post by bho »

Lewisham wrote: post #6
ansy wrote: post #4

I think if HP has to flood the market with zero margin devices to make a dent it did the right thing by getting out of that business once and for all. It has better ways of occupying its resources. EDIT: I fully realize the TouchPad costs more to make than $99 and the margin during the fire sale was less than zero. If anything it probably barely covers the cost of supporting the units and software through the support…

I don't think the firesale was even zero margin; I think it was just cheaper than dealing with the shipping/storage/recycling costs. I expect the hardware cost more to make than they were sold at.

Yes, I've read some reports about the hardware cost being in the neighborhood of $300. Definitely not zero margin.

Re: HP's $99 TouchPad Fire Sale Can Teach Everybody A Lesson

#13

Post by wvenable »

TomOfTTB wrote: post #3

I've seen this written by a couple of different people over the weekend and it terrifies me every time. It's as if the author is completely divorced from reality. As if "just price it lower" is some kind of poignant observation that no one thought of. As if it were easy to compete on price when Apple is buying parts in quantities you couldn't hope to match. I'm always critical of people who make the argument that "fr…

I think there's room in the market for an inexpensive web-only tablet. Before the Chromebook's came out, I had assumed that was what Chrome OS was for -- a real stripped down inexpensive tablet with almost no local flash, a small amount of RAM, etc. Most tablets right now are attempting to match the iPad in every way: capability, size, weight, etc. So, of course, they're in the same price range.

Re: HP's $99 TouchPad Fire Sale Can Teach Everybody A Lesson

#14

Post by MatthewPhillips »

mgkimsal wrote: post #8

$99 is obviously just 'get rid of them' pricing, but there's a big gap between $499 and $99. $249 or $299 pricing may have lost HP a bit per sale, but during that time, they could have really established a bigger presence without using much advertising budget. Is it better to have lose $30 per device and sell a million - which then gives you a million + devices in the marketplace with a unified hardware/software plat…

The parts alone cost $328[1] I think it's safe to say that your pricing plan would have them losing $100+ per device. So selling a million Touchpads (which wouldn't even be that great) has them losing at least 100 million. And who knows if they would have even sold that many at $299. There are Android tablets priced at what you're suggesting, but I doubt their components cost as much, and I don't think their sales are anything massive.

[1]http://www.techfever.net/2011/07/hp-touchpad-parts-estimated...

Re: HP's $99 TouchPad Fire Sale Can Teach Everybody A Lesson

#16

Post by hollerith »

Lewisham wrote: post #6
ansy wrote: post #4

I think if HP has to flood the market with zero margin devices to make a dent it did the right thing by getting out of that business once and for all. It has better ways of occupying its resources. EDIT: I fully realize the TouchPad costs more to make than $99 and the margin during the fire sale was less than zero. If anything it probably barely covers the cost of supporting the units and software through the support…

I don't think the firesale was even zero margin; I think it was just cheaper than dealing with the shipping/storage/recycling costs. I expect the hardware cost more to make than they were sold at.

before the iPad 2 came out, I saw an article here that said that an iPad 1 costs Apple about $300 to make.

Re: HP's $99 TouchPad Fire Sale Can Teach Everybody A Lesson

#17

Post by MatthewPhillips »

lucasjake wrote: post #5

Pricing them at $99 with the current inventory amounts to almost a hundred million dollars in what would have been losses to establish a beachhead. Except, there is no beachhead to be established here. Its not like the kindle because HP has no track record in selling media like Amazon, and its not like the iPad because they don't have the vertical integration like apple does, and its not like android because they don…

It would be much more loss than that. The components alone cost over $200 more than that price. I'm sure HP is willingly swallowing 500+ million in losses to get out of the consumer computing business.

Re: HP's $99 TouchPad Fire Sale Can Teach Everybody A Lesson

#18

Post by mgkimsal »

MatthewPhillips wrote: post #14
mgkimsal wrote: post #8

$99 is obviously just 'get rid of them' pricing, but there's a big gap between $499 and $99. $249 or $299 pricing may have lost HP a bit per sale, but during that time, they could have really established a bigger presence without using much advertising budget. Is it better to have lose $30 per device and sell a million - which then gives you a million + devices in the marketplace with a unified hardware/software plat…

The parts alone cost $328[1] I think it's safe to say that your pricing plan would have them losing $100+ per device. So selling a million Touchpads (which wouldn't even be that great) has them losing at least 100 million. And who knows if they would have even sold that many at $299. There are Android tablets priced at what you're suggesting, but I doubt their components cost as much, and I don't think their sales ar…

Most of the Android ones I've seen at that price are pretty abysmal compared to webOS. Personal view, obviously, but webOS in general is a nicer experience.

So... they paid $1.2billion for a company, but another $100 million (I suspect the delta would have been less) is too much to put in to an investment?

If you actually had a million of those devices sold even within 6 months, that'd be a big momentum for a third party player. Devs would have paid money to be part of their dev program - jumping on a unified platform bandwagon for $99/year (same as Apple) would have led to some revenue as well to offset some of those "losses".

Re: HP's $99 TouchPad Fire Sale Can Teach Everybody A Lesson

#19

Post by MatthewPhillips »

nradov wrote: post #7
TomOfTTB wrote: post #3

I've seen this written by a couple of different people over the weekend and it terrifies me every time. It's as if the author is completely divorced from reality. As if "just price it lower" is some kind of poignant observation that no one thought of. As if it were easy to compete on price when Apple is buying parts in quantities you couldn't hope to match. I'm always critical of people who make the argument that "fr…

Not crazy at all. The rule in hardware is price it to sell, regardless of profit margins or lack thereof. Then — if you get sales traction — figure out how to drive your costs down through economies of scale, substitution of cheaper components, design simplification, etc.

You have to have very deep pockets, and the ability to pacify your shareholders, to absorb these types of losses. I think people are really underestimating how much HP has lost here.

Re: HP's $99 TouchPad Fire Sale Can Teach Everybody A Lesson

#20

Post by Duff »

TomOfTTB wrote: post #3

I've seen this written by a couple of different people over the weekend and it terrifies me every time. It's as if the author is completely divorced from reality. As if "just price it lower" is some kind of poignant observation that no one thought of. As if it were easy to compete on price when Apple is buying parts in quantities you couldn't hope to match. I'm always critical of people who make the argument that "fr…

Ultimately, price drives decisions. My neighbor doesn't understand why he can't sell his house. The reason is simple -- he's asking 25% more than the market price without giving people a compelling reason to spend the money.

The Touchpad is telling you something about the iPad market (there is no such thing as a "tablet" market). People are willing to line up to spend $500 on an iPad. But they are also willing to spend $99 on a tablet that does/will do less than an iPad.

So, you need to: - Take massive losses on hardware (Microsoft, for example, could afford to do this) - Build something that takes advantage of advantages that you have over Apple. (ie. Apple doesn't get enterprise at all) - Come up with some other value proposition (integrate with my car, use as interactive visual display, etc)

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