Why HP Touchpad?s Price Cut is a Smart Move

Hewlett Packard has permanently cut the price of its Touchpad tablet and in doing so is likely trying to overcome some earlier mistakes it made with the device.

Last week, HP announced its 16GB and 32GB touchpad tablets -- originally priced at $499 and $599 respectively - were going to be $100 off for last weekend only. However, at some point, the company was so satisfied with the results that it decided to make the price cut permanent. The company subtly announced the price cut yesterday, only after a few consumers noticed it was still on HP's Web site.

One analyst, Avi Greengart with Current Analysis, says this is a good move for HP and could heal some earlier wounds the company brought on itself. For one, the original tablet came out with a lot of bugs and because of that, HP paid with terrible reviews. Secondly, a lot of other reviewers said the device was priced too high.

"I do think the price drop was necessary, as HP clearly wasn't getting the volume sales it needed at $499. HP's webOS offers superior multitasking, but user interface simply is not a pain point for iPad users, and the TouchPad lacks the iPad's apps, content, and slimmer, lighter form factor," Greengart said.

However, even with the price drop, Greengart says he expects consumers who want an iPad will be willing to spend more to get one. Still, he says consumers primarily looking for a tablet for email, web browsing, and calendar will now see Touchpad as an affordable alternative.

If you're an early adopter and are a little peeved that the company decided to cut the price after only a month or so of being on sale, HP will try and rectify the situation for you. The company is offering early adopters a $50 app credit.

In addition, the company has offered several deals that cut the price even further. For students, there is a coupon for $50 off the asking price. For all other consumers, there is a $40 coupon. In both cases, the code is Save30HP.

In cutting the price, HP may be admitting the original price was too high. Other tablets, like Motorola's Xoom and Samsung's Galaxy Tab, have seen price cuts in their cycle, but none have been as quick to do it as HP.

HP hasn't released early sales numbers but if its anything like its iPad competition brethren, it's probably not good. A recent report from Motorola indicates the company has SHIPPED 440,000 Xoom tablets over the past three months. That's shipped...who knows how many it has sold. Samsung has only sold a couple million Tabs. Meanwhile, with 35.61 million units shipped out this year, Apple has 85 percent of the market share according to Needham analyst Charlie Wolf.

Some, like Wolf, don't hold out much hope for iPad competitors. Wolf says by 2020, the iPad will still have a whopping 60 percent of the tablet market share.

"HP continually evaluates pricing for its products and is pleased to permanently extend its back-to-school promotion on the HP TouchPad. Now consumers can have all the benefits of webOS -- multitasking, Synergy, Just Type, and access to the thousands of apps in the App Catalog for $399 (16 GB) and $499 (32 GB)," an HP spokesperson said about the price cut.

UPDATE: 12:51 pm