SHOCKER: HP TO BRING BACK THE TOUCHPAD, NO DETAILS ON WHEN, QUANTITIES OR PRICE, CREATES LOTS OF CONFUSION

 

The TouchPad is dead. Long live the TouchPad.

Hewlett-Packard Co. said it will temporarily resume manufacturing of its ill-fated tablet computer just 11 days after killing its iPad rival as part of a sweeping corporate overhaul.

The resurrection of the TouchPad follows a spike in demand after H-P, desperate to clear out unsold inventory that had piled up at retailers, slashed the price of the low-end model from $399 to $99.

The decision to discontinue the TouchPad came less than two months after the tablet first went on sale in July, but made little traction against Apple Inc.'s iPad despite an earlier 20% price drop. H-P executives said sales were too weak to justify continued investment.

H-P didn't say what it would charge for the new batch of TouchPads, but cautioned potential buyers there might not be enough to go around.

H-P spokesman Mark Budgell wrote on a company blog. 

"We don't know exactly when these units will be available or how many we'll get. We can't promise we'll have enough for everyone."

The company said it is pleased by the response it has gotten so far.

On Aug. 20, H-P inadvertently created a TouchPad boom when it dropped the price of the device. The move generated an Internet phenomenon—with Twitter users sharing tips on websites were it was still in stock—and long lines at retailers, including Best Buy Co., as consumers jostled to pick up a $99 TouchPad.

The decision to manufacture a second run, however, left analysts scratching their heads.

The introductory model of the TouchPad costs $306 to manufacture, according to an estimate from research firm IHS iSuppli, suggesting a loss of roughly two-thirds if it is sold for $99.

Sterne Agee analyst Shaw Wu said the temporary return of the TouchPad was likely a poorly thought-through decision.

Mr. Wu said.

"They did a lot of these moves in haste." 

He said the move will likely create confusion among customers and application developers, which H-P is still trying to woo.

H-P's temporary reversal comes in the midst of a strategic overhaul that will focus the company on software and services. As part of the change, H-P decided to stop making the TouchPad and other hardware running its webOS software. It is also looking to spin off its computer business, the world's biggest.

The company hasn't said what it will do with the group that manages the webOS software, which was acquired with smartphone maker Palm Inc. for $1.2 billion in 2010. The company has said it was investigating ways to continue using webOS.

COMMENTARY:   HP didn’t disclose how many tablets it sold.  According to PC World, they were told that out of an estimated 250,000 TouchPads in Best Buy stores, only 10 percent of them were sold.   Supposedly, the consumer electronics retailing chain returned the unsold units to HP, when then sold them at the $99.00 fire sale price shortly after HP announced it would stopping production of the TouchPad.

Tablet consumers are lured to products with the promise of apps and software upgrades. Tablets are dynamic and evolving -- that is until developers drop off or a company pulls the plug like HP has done.  HP's about face on the TouchPad, is creating even more controversey and confusion in the marketplace.

I found the decision to resurrect the TouchPad tablet only 11 days after HP announced it would discontinue production due to very poor sales very surprising, and the decision to cease production made in haste.   This was immediately followed by a shocking announcement that it would spinoff the personal computer business due to declining market share and very low profit margins.

Today's shocking announcement that HP will resurrect the TouchPad makes me wonder about its motives. Here are a few guesses.

• Temporarily slowdown Apple's momentum by offering a cheaper alternative to the iPad. However, selling the TouchPad at the $99 price does not make economical sense since it loses $207 per unit.   
• HP's new strategy is to focus on software and services. Perhaps it intends to use the TouchPad as a test for an increasing returns business by making money on the software, that offsets what any loss on the hardware.  This is similar to what HP has done with its printer business.  It loses money on printers, but makes it up on the toner cartridges.
• HP is stuck with a lot of parts and components and this is a way to get rid of them.
• HP has found a cheaper way to produce the TouchPad and still make money.
• HP intends to introduce a TouchPad in-a-bag kit.  Buyers would have to build it themselves.
• HP intends to sell the TouchPad or TouchPad in-a-bag kit direct-to-public via its own ecommerce site.
• HP CEO Leo Apotheker has gone completely off his rocker.

Courtesy of an article dated August 31, 2011 appearing in The Wall Street Journal Technology

Comments

[iPhone Game & App developers]

This surely makes perfect sense to me.