It's been a wild week for Hewlett-Packard.
Last Thursday, HP announced it was spinning off its PC business, ending all webOS devices including the recently launched and highly promoted Touchpad and acquiring an enterprise software company, Autonomy. It was a stunning move, a huge shift in the company's focus, and the reaction was ugly.
The day after HP announced the move, its stock fell 20 percent, going from $29.46 to $23.86. A seemingly disarrayed HP decided to cut the price of the Touchpad to $99. The price was originally $499, but got slashed twice.
After the price cut to $99, something crazy happened. The Touchpad (or Ouchpad as it was named by the media) started flying off the shelves. Within hours of the $99 sale, HP announced it was out of Touchpads in its inventory and it was going to restock. The device topped sales charts on internet retailers such as Amazon.com.
The device that may have brought down HP's personal systems group once and for all was suddenly he hottest product on the Web. It's been a few days since this has happened, and now everything can be dissected. Here are five things to take away from the Touchpad's success story.
$100 Price Point: Now we know what it will take to unseat Apple's iPad in the emerging tablet market: a cheap product. When HP (and others) tried to sell tablets for the same cost as the iPad, it was a no-go. As soon as it went down to $100, it sold out. So for any future iPad competitors it's simple, just sell the device for $100, right?
Oh Right, Component Costs: Here's the problem with that strategy: The Touchpad cost about $320 to make, according to research firm iSuppli. That means HP is losing quite a bit on each one sold for $99. The $320 cost allowed for HP to build a high-end tablet. If it cut back on component costs, they would have sold a low-end tablet and probably not nearly as comparable to the iPad as the Touchpad. If a company can make a high-end tablet and sell it for $100 at a profit -- by all means, they'd probably have a winner. That might not be possible, however.
Apple's Strength Reaffirmed: As Noah Elkin, mobile analyst at eMarketer, put it best regarding Apple's strength in the industry: They've been able to build a beautiful device, sell it for a reasonable price and still make a strong margin -- probably 20 percent to 30 percent.
Mid to Low-End Devices: If you just want to offer the basics, which are different from the iPad, you won't get crushed. Lots of media members and tech analysts point to Amazon as a company that could take advantage of this. With a tablet that offers basics plus the Kindle, Amazon could do well in the tablet market.
HP Shouldn't Give up so Easily: Even at a $100 price point, not every company can sell a tablet as impressively as HP sold the Touchpad. There are a lot of no-names that sell nothing tablets for that price and have got nothing out of it. (Ever hear of the Maylong Android Tablet? Didn't think so). HP still has name power in consumer devices.