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One Final Manufacturing Run of Touchpads
Accepted on the first attempt, lochnessie writes "HP has announced a limited manufacturing run of Touchpads to be available in the next few weeks. The HP employee making the announcement posted 'I think it's safe to say we were pleasantly surprised by the response' to their massively discounted, sold-at-a-huge-loss tablet."
How much money did Microsoft burn trying to get the XBOX off the ground? Sometimes it pays to make a little investment in the future. If HP had sold these even at $150/$200 or maybe $200/$250, sure they would have lost money on each unit, but how long until it overtook iPad? Tablets are going to be selling for $100 in 5 years anyway, and HP could have sold a LOT of them at a loss to make it into the market. Once the established leader had been displaced, they could have made tons of money on licensing, app store purchases, etc. Maybe even eventually on hardware. I think they were looking for a home-run, and when they didn't get it, they just gave up all hope. Bad move on HP's part.
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If I had to guess, it's probably because they already have orders in with their suppliers that they can't cancel and contractual obligations to fulfill. The costs of making this final run are probably sunk costs, and they figured they might as well go ahead and make those last $99 sales before everything is shut down and done.
if there's demand for your product, keep making it.
I'm not sure that works if the reason for the demand is that you're selling it at a huge loss without any business model to recoup the loss.
There is demand because of the discount, not because of the value.
At an 80%+ discount and $100, its in the impulse buy range for a lot of people, no matter if it ends up being a useful device or not. Hell, I've got a drawer full of discounted crap in that price range.
I wouldn't assume a tablet at $250 or $300 would sell even remotely like $100... and if it was always $100, it also wouldn't have sold like that.
Or 4) They liquidated their assembled units but still had remaining parts not usable for anything else. To liquidate said parts, it's easier to sell assembled units at well below cost than to try and sell the parts piecemeal.
retrorocket.o not found, launch anyway?
Then why would you make another run at a loss after you were sold out?
Couple of potential reasons that aren't completely stupid:
1: Stockpile of unassembled / partly assembled components that they couldn't find some other company to buy in the last couple of weeks. and
2: Expensive to exit contract(s) with one or more companies at some levels of the manufacturing layers (component suppliers, final assembly provider).
If you want to see what sort of price the market has set, go onto eBay. The 16GB version is selling.. and I mean with real bidders.. at about £200 ($325), with the 32GB version coming in at around £230 ($370). So this is perhaps the sort of price point they should have been selling at.
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Yeah but they are selling on Craigslist for $320 RIGHT NOW and from what I read the BOM on the 16gb is $318. Sell them for $350 and make a nice tidy profit.
Sadly though this is why we are doomed and the far east will win, because nobody in the states wants to do shit unless "We can make iMoney nom nom nom!" and show constantly climbing profits to Wall Street, which is now just Vegas with nicer clothes.
Meanwhile companies like Lenovo will be more than happy to take those 100 million plus 6% profits that the western CEOs look down their noses on because "Its not iMoney! Nom nom nom". i predict the OEM will die, replaced by the ODMs who will cut out the middle man and keep the 6% profits for themselves. I wouldn't be surprised if some Chinese company just takes the Touchpad design, slaps Android on it, and has them for sale at $375 by Xmas.
I STILL think they are ALL missing the magic iPad killing price point though. Make a dual core ARM with 4Gb of storage and 512Mb of DDR2 for $199, with the single core going for $149, both running Android. You put that out and it will frankly slaughter as we have seen "good enough' and cheap kills should be the goal. Apple can keep the high end but the one that hits those price points with decent specs WILL take a HUGE chunk of the market, mark my words.
ACs don't waste your time replying, your posts are never seen by me.
If you had actually followed the news you would be aware that HP offered to refund the price difference to anyone that bought a touchpad after a certain date (IIRC it was July 15th, a month and half before the price cut if not the very day they went on sale). You could do it through the retailer or directly through HP. It was a very fair offer IMO.
However, this does prove EXACTLY how stupid HP is, if they killed it so quickly without knowing about 1 or 2 (whichever it was, if not both.) As for being "stunned" at the response--really? I mean, they got lukewarm reviews, but everyone said they were decent devices, and HP could have EASILY sold all of their stock at about $249 each*, and not looked quite so much like chickens with their heads cut off while doing so. The only message the $99 price sent was "We want out of this fucking business TODAY."
And in case anyone is wondering why HP is doing what they're doing, read this. Very nice one-page summary from the Wall Street Journal.
* $499: no sales. $449: no sales. $399: no sales. $99: SOLD OUT IN HOURS. Maybe there's a reasonable (though still not profitable) middle ground there somewhere...
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Name a SINGLE component at the specs I called for that would kill those numbers, just one. A 1Ghz dual ARM? shouldn't be a problem. 4Gb of NAND? Dirt cheap. 512Mb of DDR3? beyond dirt cheap, Android? Free. And the $149 model would frankly most likely be the more profitable one, you could cut the NAND to 2Gb (both will have MicroSD slots of course) and a single core ARM at 1GHz I'm sure would be quite affordable.
The problem is NOT the specs, the BOM, manufacturing costs, or even development. The problem is every damned western company wants to be Apple and won't settle for less than 30%+ profit margins. look at the Touchpad, you had a BOM for $318 and they were selling for $500. Even if you took out say $60 a unit for advertising (which frankly HP didn't do shit for advertising) they still would have been making out like fricking bandits and THAT is the problem. Honest 5%-10% profits simply aren't acceptable to the PHBs and Wall Street, it has to be iMoney.
And THAT sir is why the far east will royally kick our ass. it isn't that American companies can't design and build great products, it is that our CEOs and PHBs are too fucking greedy and won't have anything less than 30% profit. There can only be one Apple, yet they would rather make nothing than not make iMoney on a product. how fucking sad.
ACs don't waste your time replying, your posts are never seen by me.
First, look at the iSuppli BOM...
http://www.isuppli.com/Teardowns/News/Pages/HP-TouchPad-Carries-$318-Bill-of-Materials.aspx
The display is $69. The Touch Screen is $63. $45 for 32GB NAND. $26 for DRAM. $20 for the dual-core processor. $12 for power management. $8 for sensors. $5.50 for WiFi. $30 for the case, connectors, PCB, etc.. $20 for the battery. $5 for box and contents. $10 for manufacturing.
You're right in that there's not one single component that would kill those numbers... IT"S ALL OF THEM ADDED UP TOGETHER.
Your wonderful set of suggestions dropped the BOM down to $273. How many more corners and features are you going to have to cut to hit your numbers? And once you do, is the POS even worth buying? A plastic 5" tablet with an anemic processor, half the RAM needed to do anything, and no storage? Right. Ask Dell how well the Streak 5 sold...
(Oh yeah, add SD slot hardware and a controller chip to your BOM.)
And THAT'S only the BOM. Then it has to be shipped. Distributed. There's R&D, engineering, and development costs. Admin. Marketing. Patents, licensing, and legal. Recouping $1.2 billion in acquisition costs. Costs. Costs, and more costs. And that's before it's even in a store and the retailer marks it up yet again by another 10%. Then there are returns, damaged goods, shrinkage, and demo units.
30% profit? In your dreams. People look at the BOM and COGS and think, "Damn. They're making out like bandits."
Get a clue. To make ANY money selling a tablet at $149, your BOM would have to be less than $50. Good luck hitting that price point.
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