
HP to produce one more batch of Touchpads - yumraj
http://h20435.www2.hp.com/t5/The-Next-Bench-Blog/More-TouchPads-on-the-Way/ba-p/68749
======
corin_
While selling at a loss to make profit on software doesn't look feasible in
this market, here's an alternative suggestion, though I'm not sure if this is
feasible either - just more likely than the first option.

Sell loads at a loss, I mean really loads. Announce that the platform isn't
dead after all. Use the fact that so many people have the devices to bring in
app developers, make it a more desirable platform. Then, when their future
devices sell for a profit, people will actually want them.

~~~
ansy
This has been forwarded before and I agree with detractors to this kind of
thinking.

First, HP is a big company that has much better ways to turn money into more
money than making something people are unwilling to buy at a reasonable price.

Second, growing the webOS ecosystem in this way founds it on false principles.
Everything that seems to work when you're selling for a loss, might not work
at all when you're selling for a profit. Just imagine if HP started off
selling a $99 TouchPad, blowing out the doors, piling up billions in debt, and
then found out everyone wanted an iPad when the price went up to $500. Oops.

The best modern example of this I think is Groupon. Groupon has been growing
like crazy by taking a huge loss. For every dollar it takes, two dollars go
out the door in the form of advertising and client acquisition.

Groupon is already of questionable value to some businesses. When the time
comes for Groupon to fix its profitability the value proposition may be lost
entirely.

~~~
teyc
I might note that Microsoft lost money on every XBox initially. But gaming was
a different business.

~~~
danilocampos
A business where they can extract _enormous_ licensing fees from content sold
at a much higher price point.

~~~
teyc
You are quite right. iPad apps have a much lower price point. Apple could have
extracted significantly more rent if they hadn't allowed free apps.

~~~
stephen_g
But I doubt that the ecosystem would be anywhere near as large if the had, so
doing that could have ended up making them a lot less money.

------
voxmatt
I've been wracking my brain on this one and have yet to come up with a theory
that doesn't end in: that place is on fire. I think WebOS is wonderful, and
wished HP had stuck to its guns, but this is just strange. It reeks of
internal anarchy.

~~~
wavephorm
The HP saga is like watching an episode of "Intervention".

------
mikeknoop
Did HP accidentally just find the best way to break into the tablet market?

Sell hardware at a loss and make it up on software. Console makers have been
doing it for some time now.

~~~
martingordon
The analogy doesn't hold. Try to use a TouchPad without buying apps and you'll
find that it works pretty well.

Try to use a console without buying games. Hope you enjoy navigating menus!

~~~
wmf
Except the PS3, which is a pretty good Blu-ray/Netflix/DLNA player and
probably had problems with low attach rate in the first few years.

~~~
MatthewPhillips
$300 is a pretty expensive blu-ray and streaming player.

~~~
caf
It is now, but when the PS3 first came out it was one of the _cheapest_ blu-
ray players available.

------
martingordon
Whoever made this decision should be fired.

"We took a $100m loss on the first batch of TouchPads, what's a couple million
more?"

~~~
ansy
I suspect this is just HP clearing out the supply chain of already purchased
parts and units still at the factory. HP's cost is probably just a few dollars
per unit to ship and possibly assemble them.

I find it hard to believe anyone approved an entirely new order of parts at
$300 BOM just to sell them for $99.

~~~
martingordon
You may be right, but if it's not an ops guy getting fired, then it should be
a PR guy. I mean, look at this:

"Before I share, let me first say thank you for enthusiasm for this product.
Since we announced the price drop, the number of inquiries about the product
and the speed at which it disappeared from inventory has been stunning. I
think it’s safe to say we were pleasantly surprised by the response.

Despite announcing an end to manufacturing webOS hardware, we have decided to
produce one last run of TouchPads to meet unfulfilled demand."

They didn't decide to produce one last run to meet unfulfilled demand, they're
producing one last run to get rid of unused parts. Just put the new devices up
on the store and send out a tweet; don't spin this like some grand gesture to
please your adoring fans.

~~~
spiralganglion
I don't understand all the down-votes. This seems like a valid and well-meant
contribution to the discussion, being voted down because it presents something
slightly contrarian. Why is martingordon's suggestion any more unworthy of HN
than the earlier suggestion that the person responsible for this new run be
fired? They're both looking at this news inquisitively, trying to understand
the forces behind the public actions of HP following their recent mutation.

If you're voting it down, just be sure you're not doing so out of disagreement
with the points raised.

~~~
ghshephard
A downvote on a contributor can be, and frequently is, a vote of disagreement,
regardless of how well intentioned and expressed the contributor was.

~~~
spiralganglion
Hiding a valuable contribution because you disagree with it probably isn't the
intended purpose of the system. Hiding something that lessens the quality of
the conversation, independent of the skew it takes, makes more sense.

It doesn't matter what the common practice is. What matters is preserving the
integrity of the discussion.

~~~
alexqgb
If it's heavily down-voted, then it's probably not conspicuously valuable.
Indeed, that's exactly the point.

------
dman
Here in NYC there are many stores which advertise 'Going out of business sale'
throughout the year to target innocent tourists. Wonder if someone in HP
marketing thought that this would be the best way to jumpstart an initial pool
of users.

------
toblender
Looks to me like HP is fattening up WebOS for a resell.

~~~
marcf
I share your thoughts. It makes a lot of sense from this perspective as WebOS
could be worth a billion or more so what is a loss of a few million on
ensuring a good sale.

~~~
w33ble
Same. Not sure they want the resale though, I think they rather get some
manufacturers on board, license the OS and sell support. Seems to jive better
with their current stated focus of software.

------
heydenberk
HP should do what they should've done a while ago: promise to make WebOS well-
supported and well-stocked with apps, and bring the TouchPad into production
at $200 or $250 to still undercut the competition but not bleed cash so
profusely. I'd buy into it as a user and a developer.

~~~
w33ble
Given that the tablets are still fetching that price on eBay right now, over a
week after the firesale started, I think that's exactly the price they need to
hit. The tablet simply had no demand at $500+, but at $250, people are willing
to buy in.

$250 for what is essentially a handy, high-tech toy is about right. Plus, HP
wouldn't be senselessly bleeding so much cash. Ebay sales show up people are
clearly willing to drop $200-250 on the things, there's really no reason they
should have or should keep selling them at $100-150.

~~~
cpeterso
Based on some TouchPad teardowns, manufacturing a TouchPad costs about $318 in
parts plus $10 in labor. If HP sold TouchPads for $250, they would "only" lose
$68.

[http://www.isuppli.com/Teardowns/News/Pages/HP-TouchPad-
Carr...](http://www.isuppli.com/Teardowns/News/Pages/HP-TouchPad-
Carries-$318-Bill-of-Materials.aspx)

~~~
w33ble
Right, but recouping a $68-118 loss is more feasible than recouping a $168-218
loss. There's a decent markup on their accessories and the potential for app
sales. If it drives enough demand and gets companies licensing their OS and
selling hardware running it, they have a chance to make it work, and it's
probably money better spent than any advertising they do. Look at it this way;
before the fire sale, how often did you see stories written about the Touchpad
and how many people did you know that bought or wanted to buy one? And how
many stories and interested consumers did you see after the fire sale? Food
for thought.

Time will tell if they can pull it off though.

~~~
georgemcbay
I agree that this firesale is a valuable lesson in pricing, and HP clearly cut
the price by more than they needed to to achieve their goal of unloading
existing inventory, but there are more factors at play here than price alone.
I'd bet that if HP had just lowered the price to $250 they would have sold far
less units than are now selling on ebay for $250.

The $99 price point set off a feeding frenzy on this sale, and once that
frenzy started people who were trying to buy the unit for $99 and failing (due
to all the retailers overselling stock and then cancelling orders) were able
to rationalize themselves progressively higher until they were okay with the
$250 price.

I'm not convinced there would have been nearly as big an uptick if this
started out with a price drop to $250. Certainly sales would have jumped, but
I don't think it would have been nearly as drastic as what actually happened.

~~~
w33ble
Yeah, you're probably right here. At $200-250 though, they would still be
priced lower than any big brand names making tablets, regardless of OS. That
alone would have sparked demand. Would it have been as explosive as it was?
No, but they also wouldn't have lost as much money and might have avoided the
potential doom to the platform.

Consider this as well:

[http://www.zdnet.com/blog/hardware/hp-single-handedly-
destro...](http://www.zdnet.com/blog/hardware/hp-single-handedly-destroys-non-
ipad-tablet-market/14340)

HP has set the bar pretty low for tablet pricing. All these new Touchpad
owners now have $99 in their head, and when it comes time to upgrade, they
will probably walk away from the more expensive options.

Personally, I don't think there is a tablet market, just an iPad market, and a
big part of that has been price. Only Apple is Apple, and nobody else can
demand that kind of money for what is essentially a toy and get away with it
on the scale they can, for various reasons. Had HP set the bar at $200-250,
they could have made the sales they were hoping to make, lost less money and
still potentially make money on future, cheaper to produce hardware; or at
least left that door open for another company to license their OS and do so.
Nobody can make money at $99 without some huge profit margins from something
else, and I don't think the tablet market has that something else (yet). Now,
a lot of tablet consumers have that $99 price in their head, and it's going to
be a hard sell getting them to spend more in the future.

------
ars
It's pretty clear to me that they underpriced it.

They should lower the price to the point where the clear out inventory. But
not lower.

Considering how much unmet demand there is at 99$ it's obvious that have not
even come close to optimizing the price/demand curve.

~~~
wanorris
The current lowest Buy it Now price at Ebay is $230-240. That means that's the
price at which people will buy them -- but not so much that people will snap
them up instantly, or the price you could see them available at would by
higher.

That suggests that they could probably move units pretty well at $199 -- it's
below another psychological barrier from $230, and definitely still seems
extremely affordable compared with the iPad or even the Asus Transformer.

I'm not sure if they had a reason for marking the units down to $99 (e.g. "we
need to get these things off the books as soon as humanly possible to get a
clean slate") or if they just made a huge mistake.

------
ddw
Forget about HP for a minute. Are there any devs out there that are
considering creating a WebOS app because of this new influx of users? I'm
genuinely interested...perhaps it would be worth it.

~~~
raganwald
Ok, I’ll pretend to be a VC. So you make a WebOS game/app. What kind of users
do you expect to have? A whole bunch of cheapos who bought the tablet because
it was $99. And how much do you think those people will pay for your app?

Next question. Word of mouth. If those people like your app, they’ll tell
friends. Will those friends have WebOS tablets?

Let’s talk about the lifetime value of your code base. How long can we expect
to make sales of your app? After we have saturated the market of existing
Touchpads, will there ever be another piece of hardware running WebOS to sell
to new customers who might buy your app?

    
    
      =====
    

Right now, I’d say this is a cherry-picking exercise. If you can port an
existing app to WebOS and make money on a short-term basis over and above your
porting costs, fine. Otherwise... Android and iOS are the two front-runners
with Windows-Phone-whatchamacallit a distant third.

IMHO.

~~~
jackson71
Anecdotally, webOS devs, given the low threshold of competition and influx of
new Touchpad owners, are doing pretty fantastic sales right now. Good for a
quick return at least. Since HP's also being charitable and giving away
6-packs of apps for free (and paying the dev for each one at full regular 70%
share), a couple of those devs picked found themselves 5-figures richer
overnight. No idea how long they intend to keep doing it, but it seems ongoing
for now.

Good platform for quick wins. Mid-term and longer, it'll largely depend on
whether webOS finds new hardware with which to keep it alive.

~~~
w33ble
I think that's the key; new hardware. If HP relies on the TouchPad for any
more than 6 months, a year tops, they'll completely lose out on all their
efforts. They need someone else to make better and still cheap hardware to
keep people interested and buying. There are simply too many Android devices
coming out, each one better than the last (forcing a price reduction of the
last), to ride their current wave for any longer than that.

It's still very curious why they called an end to the hardware production
BEFORE they had someone lined up to make new devices though.

------
swombat
They'll make it up on volume, eh?

------
knotty66
The offer they mention:

We are grateful for your patience and loyalty and to show our gratitude, we
are offering you an exclusive one-time opportunity to save an additional
amount on all of our products, valid through the end of the day tomorrow,
Wednesday, August 31, 2011. You'll save 25% off all printers, ink, HP
accessories, and PCs starting at or above $599.

Not bad, if there's something specific you want.

------
lionhearted
Tangential: I think HP's stock might be selling for less than the company's
liquidation value at this point, depending on what you think of their patents.
That's ignoring the fact that they also have some profitable high margin
businesses.

Sure, they're doing some boneheaded stuff lately, but I couldn't resist buying
some. Buying $1 for 88 cents is usually a good move. I sold some TIPS bonds to
buy shares.

 _Disclaimer: Obviously I just bought some of the stock. I'm not sure if
they're selling for below their liquidation price. Check the financials
yourself and do your own research. Etc, etc._

~~~
mcnees287
Dump the TIPS man.

~~~
lionhearted
> Dump the TIPS man.

I had some USD, didn't see any good buys, and wanted to stay liquid in USD. I
figured inflation was definitely coming, so even if interest rates rose
(unlikely anyways, but the only real risk) it'd likely be cancelled by the
inflation premium.

The bonds appreciated around 7% in four months, so it worked out okay.

~~~
pinko
The big problem with TIPS is that the government gooses the CPI formula to
understate inflation, so they're really providing an (inflation - n%) return,
not an (inflation + n%) return. That being said, I also own a small amount of
them.

------
Tichy
I find this really annoying. I already wasted too much time trying to get one
in the first round. Now I am supposed to waste time again?

I actually considered setting up a web service for companies doing such a
thing. I think the proper way would be to create a lottery where everybody
could register in peace and there would be a couple of lucky winners.

A similar thing happened with sparkfun electronics when they offered shopping
up to 100$ (or something) for free - except it was impossible to get the order
form to load, resulting in lots of wasted time.

In the end I tend to be angry at the company for wasting my time. So
companies, if you want to be generous, at least do it in the right way.

~~~
dangrossman
Woot.com has a "woot off" every few weeks, and one of the items that goes on
sale at a random time during the day is a "bag of crap". For $8, you're
promised they'll send you 3 leftover products from their warehouse. Some
people have gotten really expensive products, like large LCD TVs and laptop
computers, so everyone's willing to give it a try for $8.

Every few weeks, without fail, before and after Amazon acquired the company,
the site goes down as a hundred thousand people refresh the page trying to get
the order form to load when that item is for sale. It's very frustrating and
there are thousands of posts in their forums every time it happens from people
that were there and tried to buy but couldn't get the order form to load
before it sold out.

A lottery would be better.

~~~
kinofcain
Woot knows exactly what they're doing. They lose money on every bag of crap,
the fact that the site goes down adds to the fun. They could rent more servers
for the day (or hour) that the BOC is available for sale, but why lose even
more money? They're selling out of them in seconds, and they're driving insane
amounts of traffic to their site for the entire day as people hit refresh on a
leakfrog looking for the BOC. That said, they have taken steps to make it a
little more randomized, but only because people figured out how to game the
system, and most people getting BOCs were running scripts to do it.

------
markstahler
Why would they start another production run for a discontinued product sold at
a loss? Am I missing something or will HP come out next week and say
"Surprise! Here is a great new update for the Touchpad" and start selling them
for $200?

~~~
heydenberk
It may be that it's worthwhile to produce and sell them at $100-$150 given the
sunk cost of their leftover unassembled bulk componentry.

~~~
yumraj
Actually this is not as far fetched as it may seem. Here's a potential
scenario, building on the above, HP may have entered into contracts with
manufacturers for 'n' units. When they shut it down, they had only received
'm' units, where m < n. So, they would have had to cancel contracts and pay a
penalty.

Here, they see a rather unusual demand and must have made some calculation
that making the original 'n' units and earning good will by doing that, per
the original contracts is better (even at a loss) than breaking contract and
paying the penalty at a loss of goodwill.

~~~
megablast
Did anyone actually think this was far fetched? I thought this guy was being
totally serious, and it is the most likely event, actually discussed in the
article.

------
sjs382
What are they thinking!? They are losing tons of cash on each unit and I can't
believe that their app store is making up for it.

That said though, I bought one and never thought I'd love it as much as I do.
Maybe I'll be able to get a 2nd.

------
Hyena
Just a possibility: HP is a large company with deep pockets, it can likely
afford to sell TouchPads at a loss for quite a while. That would give them
time to work out bugs, recoup some in apps and find a less costly
manufacturing process (or let time do that work for them). If all they lose on
it is $100 million a year, it might be a worthwhile investment in positioning.

~~~
jasontsui
Unfortunately with the acquisition of Autonomy, their pockets arent so deep
anymore. They spent about 80% of their cash on the deal, leaving them with not
much money to push devices like the Touchpad at a loss.

------
abbottry
When the announced this, I told my friends:

They will drop the price, and every person that owns an iPad will buy one,
they might lose their ass on the hardware, but what happens when they release
a really nice app store and they have a zillion people now with their product
in hand?

I know it sounds far fetched, but.. its working, no? All they need now is the
app store (is it already created?)

------
brackin
They'll also make a loss with this shipment even though they won't sell them
at $99 again. I think this is just to build more Web OS customers so they can
open source, licence or sell Web OS and say "we have this many customers".

~~~
jdavid
they bought palm for $1.8billion and packaged up a few hundred million in a
few product launches. If they want to sell palm at a profit or break even, it
might be really important to add 1-5 million users even if there is a $100
loss per device.

------
mahrain
Now HP is not just selling a platform, they're selling a platform with an
installed base, developer support, enthusiasts and demonstrated demand. This
makes their business a lot more interesting for potential buyers!

------
dharmatech
Can you also make one more batch of HP48's?

------
sliverstorm
The moment my eyes fell on the title of this article, my face cracked into a
wry grin. Here we go...

------
ammmir
sometimes you have to lose money to make money. maybe they're trying to
capture the long tail of ad/apps revenue? it's a very risky move nonetheless.

~~~
georgemcbay
I think the first part of your post is correct, but I think it has less to do
with ad/apps revenue, and more to do with engendering good will toward the
WebOS brand to keep the resell value of the IP high.

The Touchpad sale thus far has tarnished the reputations of a few third party
resellers who mishandled inventory management during the firesale, see:

[http://www.amazon.com/gp/help/seller/at-a-
glance.html?ie=UTF...](http://www.amazon.com/gp/help/seller/at-a-
glance.html?ie=UTF8&seller=A33Y0YQUZ2NYD5) (note 30 day negative percentage)

<http://www.resellerratings.com/store/Onsale>

<http://www.resellerratings.com/store/Datavis>

By making more units HP comes across as the 'good guy' here towards the
(perhaps bargain-minded) early adopters and gives people an increased positive
impression of the WebOS brand and I think they are hoping that'll help them
get back something closer to what they paid for Palm when they attempt to
resell it all (which I think they will do, though obviously this is just
speculation on my part).

------
MONDAYC
IT WAS SAID THAT ALL WHO SIGNED UP WOULD GET AN EMAIL TODAY AND THATS NOT
TRUE.I CALLED AN SPOKE WITH A PERSON AND GAVE MY INFORMATION BUT DID NOT
RECIEVE AN ALERT TODAY.

~~~
josefresco
Did you yell at them on the phone? FYI that is why you got downvoted here.
Caps lock is frowned upon and considered yelling in many online communities.

------
diegogomes
seriously?

------
kingkawn
If labor and shipping per unit costs $50 (totally made up), then $99 ain't
lookin so bad

~~~
ai_mateu
No need to make up wild guesses. iSuppli says the TouchPad bill of materials
is $318. [http://www.isuppli.com/Teardowns/News/Pages/HP-TouchPad-
Carr...](http://www.isuppli.com/Teardowns/News/Pages/HP-TouchPad-
Carries-$318-Bill-of-Materials.aspx)

Even if you think they're off by 10%, $99 would never work.

~~~
mikeash
Right, but that's parts. If the parts are already bought, then only labor and
shipping has to be paid on top.

~~~
kingkawn
yes this is what I meant. Obviously they're not going to make money on this
fire sale, just hope to reduce their losses a tad and get some good PR (if
they care about consumer PR anymore).

