Has HP’s TouchPad Led The Way to £90 Tablets?

Hewlett-Packard might have inadvertently stumbled on the ideal iPad-killing strategy: Charge a mere $99 for a tablet (or £90 in the UK) with respectable hardware and decent memory, and then stand back as customers strip the shelves clean.

Of course, HP’s price slashing wasn’t driven by a desire to radically increase TouchPad adoption. As the company revealed last week, it is shutting down production for both the WebOS-based tablet and its nascent smartphones.

“HP reported that it plans to announce that it will discontinue operations for webOS devices, specifically the TouchPad [tablet] and webOS phones,” read the April 18 statement released by the company ahead of its most recent earnings call. “HP will continue to explore options to optimize the value of webOS software going forward.” Its bottom-line revenue for the fiscal fourth quarter 2011 will absorb restructuring and shutdown costs associated with webOS hardware.

Price wars are costly

The bell might be tolling for webOS, but it’s not as if another manufacturer could follow the strategy that gave the TouchPad this last, unexpected sales burst—that is, unless they’re really interested in losing cash.

“No one can make any money selling a $100 tablet,” analyst Jack Gold wrote in an 22 Aug email to eWEEK. “You can’t build them that cheaply.”

Apple’s iPad continues to dominate the tablet segment, something reinforced by the anemic sales of what were supposed to be some of its more high-profile competitors—not only HP’s TouchPad, but also the Android-powered Motorola Xoom. However, Gold sees the gap between Apple and its competitors narrowing in the longer term.

“Competitive pressures being what they are, once a product is released, your competition quickly tries to copy your success,” he added in his email. “And with all of the vendors (especially in the Android space) trying to copy Apple’s success, eventually they’ll get it right/get it close enough to … win customers.”

None of that will help the TouchPad. In its final moments, though, the tablet has revealed there is a considerable hunger for a cheap, well-powered device capable of performing a wide variety of functions. At $99 (£60), the tablet is cheaper than Amazon’s Kindle (and does much more in addition to e-reading) and is inexpensive enough to serve as that screen you don’t have to worry about, the sort of hardware you give to the kids in the backseat for that four-hour car ride, unafraid that they’ll douse it in Coke.

Could the TouchPad’s example compel rival manufacturers to offer their higher-end tablets at lower prices, even if that means taking a hit on their margins? Even if $99 is an unsustainable price point, could $199 (£120) or $250 (£151) help boost sales of a device with solid hardware and seamless access to a diverse application ecosystem? Of the cheap tablets already on the market, the near-universal criticism seems to be the shoddiness of the hardware and slowness of the processor; none of them have proven a major seller along the lines of the iPad.

Were a company like Amazon to produce a well-reviewed tablet with access to rich content, and offer it at a price that undercuts that of the iPad, it could succeed where so many others have failed. But that same manufacturer would need to bite the proverbial bullet on margins and profits — and that might prove a non-starter.