HP pulled the plug so quickly on the TouchPad that it seems obvious that HP management was just looking for an excuse to bail on it. Even though HP couldn't manage to generate sales for the TouchPad before killing it, the extreme demand for the TouchPad at the $99 fire sale price is a winning strategy for other tablets to use without throwing in the towel.
On paper, the HP TouchPad has hardware specs and software features that make it a better tablet than the iPad in some respects. For that matter, so do many of the tablet rivals available. Of course, as HP--and virtually every other tablet vendor--discovered, beating the iPad in hardware specs and matching it in price is not sufficient to drive sales.
There are some who claim that the rabid demand for the TouchPad at $99 illustrates that $99 is the magic price that tablets need to reach to create demand. I disagree. I think the phenomenal sales of the Apple iPad and iPad 2 might also suggest that you don't have to give the tablet away to make it attractive in the market.
The iPad 2 starts at $500 and Apple can barely keep up with demand. Rival tablets like the Motorola Xoom, BlackBerry PlayBook, and the HP TouchPad (R.I.P.) are (or were) also priced at $500 and have anemic sales at best by comparison. So, should tablet rivals cut the price?
No. Not necessarily. The Motorola Xoom is $500 for the 32GB Wi-Fi model, which already makes it effectively $100 cheaper than its iPad 2 equivalent. HP cut the price of the TouchPad to $400--$100 lower than the equivalent iPad 2--and still couldn't create demand. Even when the TouchPad was temporarily $300 due to special weekend discounts few seemed interested.
Sure, the TouchPad flew off the shelf and sold out almost instantly at $99, but that doesn't mean that tablet rivals have to race to the bottom to be the cheapest in order to sell. What would the point be anyway? It would be a losing proposition so there would be no reason to bother selling the tablets at all.
But, what the HP TouchPad fire sale demonstrated is that a tablet vendor can create a stampede by offering the device at $99. Samsung, HTC, Motorola, RIM, and other tablet vendors should be paying close attention to the whole TouchPad debacle, and see the opportunity it represents.
iPad 2 competitors don't have to cut prices permanently, but an initial push at $99 would work to get a tablet off the shelf and into the hands of hundreds of thousands of users. The vendor can take a short-term loss on the first couple hundred thousand units just to build a base and make a dent, then return to more normal pricing.
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Quality Matters More
This strategy can only really work if the tablet itself is a quality device. Putting a half-baked tablet with a crappy user experience into the hands of hundreds of thousands of users will just create hundreds of thousands of disgruntled customers bashing the tablet online, and to friends and family, and returning them looking for their money back.
Tablets like the Xoom, PlayBook, TouchPad, and Thrive were launched missing key features, and with glitchy interfaces and poor performance. The vendors could have given the tablets away and users still would have complained.
But, if a tablet vendor can combine a worthy tablet with a quality user experience, and launch it with a temporary loss-leader price of $100--or even $200--it could drive the sort of demand it needs to gain traction and continue to build demand even after the marketing promotion ends and the tablet pricing returns to normal.
Of course, it won't hurt to undercut the iPad 2 pricing as well.