The web is buzzing with several HP(s hpq) TouchPad price discounts and other great deals on the webOS tablet in the U.S. Woot.com is offering the 16 GB version for $379 today, while HP has a weekend special of $100 off for both HP TouchPad models, making them $399 and $499. That matches a current Staples promotion, but it gets even better at that retail outlet, with another $100 off coupon from FatWallet, dropping the entry level tablet to just $299.
Given that the recent software update made the TouchPad much better, I’m likely to bite on this deal. But do all of these discounted prices mean the TouchPad is already a flop? Some are implying that on Twitter today, due mainly to the Woot deal.
Nothing against these folks and many others that tweeted similar doom and gloom thoughts; I respect their opinions, but I disagree for several reasons.
1. If you’re paying full MSRP for an HP product, you’re doing it wrong. The company constantly discounts nearly all of its products on a rolling basis. This isn’t a new strategy, either. HP’s standard operating procedure is to run various special deals, instant rebates or small coupon code promotions for as long as I can remember. By doing this across a wide product mix, HP can better combat pricing promotions against competitors. Need an example? I recently bought a $199 wireless printer from HP that supports Apple’s AirPrint (s aapl) and Google Cloud Print(s goog). The cost? $79 shipped, because I waited for an instant rebate, which just happend to coincide with a special discount. By the way, the printer works great with the TouchPad, too.
2. Sales will attract developers (which will attract sales). HP knows it has to build up a wide number of compelling applications for its webOS product line. Developers are understandably focused on money so iOS has the bulk of their attention, followed by Android. Those two platforms are firmly entrenched at the top, but it’s a land grab for platform no. 3. Microsoft appears to be the front-runner here with Windows Phone 7(s msft), ahead of BlackBerry(s rimm) and webOS, so HP needs to jumpstart developer attention. It can afford to give up short term device profits if it brings more apps in the long term, because more compelling apps can help sell more tablets in the future.
3. You don’t spend $1.2 billion and call it quits early. That’s the amount that HP spent to buy Palm in a transition from the PC world to the mobile space. Aside from iPaq handhelds and a few early smarpthones, HP really hasn’t been in the mobile game. It is the no. 1 PC maker in the world, but that market is slowing just as the mobile market is growing. This isn’t a $1.2 billion fire sale, folks. Essentially, that’s what Steven DeWitt, SVP & GM, of HP’s webOS global business unit Personal Systems Group tweeted this morning: “Its about building new relations thru webOS. $100 off a HP Touchpad is a great deal. We r in this for the long haul!”
4. The BOM for both tablets is under these reduced prices. A recent iSuppli teardown pegged the materials cost for the 16 GB and 32 GB TouchPad at $296 and $318, respectively. Add in an estimated $10 per device for manufacturing and the production prices are still well under the special deals — except for that extra $100 coupon, which isn’t likely to appear often. There are indeed marketing and other costs that cut into device profits, but HP isn’t taking a financial bath on these deals, even if some of the lower price points happen to stick.
5. HP will still sell tablets at “full price”; even today. For all of the tweets sharing the special TouchPad deals, a number of customers will buy the tablets at full price. They simply may not hear about the special. And just like with many HP promotions, if you don’t know about them, you might not see them; even on HP’s own site. While writing this article, I searched for the HP TouchPad product page on Google and added a 16 GB tablet to my cart. There was a $50 instant rebate, but that’s not the $399 deal. If I didn’t know any better, I’d think I was getting a great discount and never be the wiser that I could save another $50 just by using a different entry point to HP’s site.
We often say the tablet market is different from the PC market, and in many aspect, it is. But HP has become the top PC seller in the world by using these pricing strategies, and there’s no reason it shouldn’t do the same thing where it can in the tablet market. Put another way: if you miss this weekend’s TouchPad deals, don’t worry, because I expect to see more in the future. Then again, I’m not waiting around: $299 is too good a deal for me to pass up!