HP TouchPad's History: Lessons Learned, Bidding Adieu

The TouchPad Firesale is dead. As you're no doubt aware, HP announced that its online inventory will not be replenished. Some retailers will have limited stock available, and they represent your absolute last chance to snap one up. After this, it's only going to be an eBay and Craigslist affair. If you've read HP TouchPad Review: A Tablet For Productivity?, then you know we're bloody impressed with the display and intuitive interface offered by webOS.

Unfortunately, the remaining deals we see are completely unattractive. Best Buy, for example, is offering the 32 GB TouchPad for $149, but you have have to purchase an HP or Compaq-branded notebook or desktop PC to qualify.

We're actually glad that this fiasco is finally over. HP has kept thousands on pins and needles waiting for the last batch of TouchPads to arrive from its ODM, Compal. Now that the craze is over, we can finally reflect on what went wrong. Clearly, there are many lessons that Amazon, Google, and Microsoft can learn to capture some of the same buying frenzy HP enjoyed at the 11^th hour.

A Chronology of the Ill-fated TouchPad

Let's rewind the clock for a moment. How did we get here? HP formally launched the TouchPad this year on July 1st, and it became available in stores about a week thereafter. However, on August 18th, then CEO Leo Apotheker basically put the kibosh on all mobile HP products, and put webOS and the PC divisions under review.

It was that weekend that HP decided to liquidate the remaining inventory of its Pixis, Pres, and TouchPads. This set off a fury of internet activity on deal sites like SlickDeals, as consumers sought to grab a cheap tablet. HP's shopping site was hammered like it was under a DoS attack and then people turned retailers.

Amazon put both TouchPad up as Lightning Deals, and each model sold out within five minutes. Other stores like Newegg were caught completely unprepared to honor the $99 (16 GB) and $149 (32 GB) pricing. People were buying the TouchPad at the normal price and hoping for a price adjustment down the road. Frankly, the buying frenzy was unbelievable, because many consumers saw this as the best deal in years, even including Cyber Monday.

Those shopping at stores like Best Buy fared no better, because fresh shipments turned up in the early morning from the company's distribution centers on specific days. As a result, the stores shelves were basically bare after the first day unless you were willing to line up early like it was Black Friday.

The deal was so good that even a few of us at Tom's Hardware got in on the action. Between three staff members, we snapped up six TouchPads. Why? Because pricing counts for an awful lot. Even among those of us with iPads, iPad 2s, and Honeycomb tablets, a $100 tablet is cheap enough that you can put it on the coffee table as a "guest tablet." It's a small loss if it breaks.

Plus, it's a gonna be a great holiday gift, a device literally worth more than it actually cost. This is a sentiment shared by many on our Facebook page. According to IHS iSuppli teardown analysis in August, HP's cost to build a 32-gigabyte TouchPad is $328.65. At $149.99, the company takes a loss of more than $178 per unit.

To give you an idea of the sheer craziness, we only need to look at Twitter. Bryna Corcoran, Social Media Strategist for HP, was the primary liaison for company updates regarding the #hptouchpad and #firesale hash tags during the first week. The number of followers on her account started out at less than 500 prior to the liquidation and quickly ballooned to about 10 000 just within a matter of days. Now two months later, she's arguably the most popular HP employee on Twitter.

Lessons Learned

Of course, the TouchPad Firesale was a one time deal. It's not likely to be repeated. However, it would be foolish for tablet vendors not to learn from HP's mistakes. For the moment, we're now down to two tablet players: Apple and Google, but there's no question that Apple continues to dominate. While Google is making decent headway with its Honeycomb-based tablets, the company still faces an uphill battle. Windows 8 looks to be an interesting pitch from Microsoft to make headway into the tablet market, but we're really not going to see products until 2012.

There are some valuable lessons to be gleaned from HP's decisions over the past few weeks. Even we were surprised by the number of folks desperate to get their hands on a TouchPad for $100. Our friends at AfterDawn report that HP sold nearly 350 000 units in the first weekend of the firesale. Consider the following:

• Apple sold nearly 1 million iPad 2s during its debut weekend. (Source: Bloomberg and Reuters)
• HP only sold 20 000 to 25 000 TouchPad during its first weekend. (Source: All Things Digital and Business Insider)
• HP reportedly only produced somewhere between 600 000 and 800 000 TouchPads. (Source: WSJ)

Clearly, price is still the reason more folks aren't buying tablets. Anyone who bought a discounted TouchPad wanted a simple device for Web browsing. But once those folks start playing with their new toys, they're going to want to start buying apps, too. That's something that would have attracted developers in droves, had it happened before HP assassinated its platform.

Tablet manufacturers often peg Apple as their competition. But that's really a mistake. If your storefront isn't as complete as the App Store, gunning for the iPad 2's price point seems like a fatal strategy. Although HP is losing millions by liquidating whatever TouchPads it still has, it taught everyone that people will rush to pay for lower-priced tablets. If tablet vendors want to see better adoption, they need to look to lower prices. As one user on SlickDeals posted, "I don't even know why I bought this but for $99, it was too good of a deal to pass up."

According to a recent IHS iSuppli survey, 79.2 percent of tablet owners confirmed owning either an iPad or iPad 2, and 50 percent of those shopping for a new tablet said they would by an iPad 2. If Google wants to make a serious dent in Apple's position, it needs to subsidize lower tablet prices, which will, in-turn attract more developers. Had HP done this right from the start, it probably wouldn't have found itself in the situation it's in now. 

Until tablets become so cheap that we just can't help ourselves but to buy one (like the SlickDeals guy), there are three main points that tablet manufacturers need to consider.

• Customers want the complete package. Right at launch, Apple had strong third-party app support, a media store, and backward-compatibility with phone apps. The competition showed up almost a year later and is just now picking up features like movie stores and zoom capabilities for phone apps. Nvidia is turning up the heat with regard to gaming with its TegraZone announcement. But productivity- and entertainment-oriented apps are still emerging slowly. Google still has catching up to do with Apple here.
• Timing is everything. The tablet battlefield would likely be different if Apple's competitors released tablets at the same time as the first iPad. HP's webOS is a beautifully-crafted piece of work. Synergy is nothing short of genius. But ingenuity counts for less when you're making up ground. At this point, tablet manufactures are setting themselves up by comparing their first-generation devices to second-generation iPads.
• Committing to the long-haul. The TouchPad didn't even last 60 days before HP pulled the plug. The company barely gave the TouchPad a chance to be recognized. Whether it would have succeeded is beside the point. In order to truly compete with Apple, tablet makers must be willing to invest money and time.

Bidding Adieu

It's too bad that we have to say goodbye to the TouchPad in this manner, because it's really a great hardware platform for webOS. Frankly, the TouchPad needed more time to mature, and a greater commitment on the part of HP to let the software and hardware coalesce.

Where do we go from here? Initially there were rumors that the TouchPad might be revived in the form of a Windows 8 tablet. However, CEO Meg Whitman seemed to put the kibosh on that idea in a recent conference call.

There are mixed emotions associated with the death of the TouchPad. Most of them are best summed up in the picture above. It's a sad day for consumers when another competitor bites the dust.