HP's bizarre decision to make more TouchPads
Company was losing money selling tablet at $99; why does it want to make more?
Hewlett-Packard announced on Tuesday that it would produce another run of TouchPads in response to "stunning" demand following the company's decision two weeks ago to discontinue webOS-powered mobile devices and offer existing inventory at $99 per unit.
Cult of Mac's Ed Sutherland raises a good question about HP's decision that crossed my mind when I was writing about it on Tuesday: Why manufacture more TouchPads?
Not only has HP already announced to the world that it's killing off the tablet it couldn't give away at $499 or even $399, it's losing money every time someone buys a TouchPad for $99. According to the Wall Street Journal, the TouchPad costs $306 to manufacture. With HP reportedly selling between 200,000 and 300,000 TouchPads at $99, that's a loss of anywhere from $41 million to $62 million.
Of course, HP has to price the existing tablets to move in order to recoup part of its investment. That's just a write-off of a bad business event that already happened.
Which is a lot different than ordering up a whole new batch of tablets that will lose you money. Unless HP intends to price the new tablets higher than $99. But I can't imagine that going over well with consumers.
It also may be that HP has contractual obligations with manufacturers and suppliers that, if violated, would cost it more than what it would to sell tablets at a loss.
The other theory is that HP has no coherent strategy regarding the TouchPad. Based on the tablet's short and disastrous run, this probably makes the most sense.