Apple 2.0

Covering the business that Steve Jobs built

Why would HP make more TouchPads to sell at a loss?

August 31, 2011: 11:51 AM ET

No, they don't plan to produce "one last run" in order to make it up in volume

TouchPads quickly sold out at $99. Source: HP

Can you spot the dissemblance in the announcement posted Monday on Hewlett-Packard's (HPQ) The Next Bench blog?

Despite announcing an end to manufacturing webOS hardware, we have decided to produce one last run of TouchPads to meet unfulfilled demand. We don't know exactly when these units will be available or how many we'll get, and we can't promise we'll have enough for everyone. We do know that it will be at least a few weeks before you can purchase.

That's right. It's there in the first sentence. HP management has made some monumental blunders lately, but it knows better than to sell product at a loss just to "meet unfulfilled demand."

There may be a lot of reasons -- although as an Apple (AAPL) iPad owner I can't think of any good ones -- to buy a $499 orphaned device when its price suddenly drops to $99.

But the only reason I can think of for HP to start manufacturing new TouchPads for sale at that price is the one suggested Tuesday by Taipai-based Digitimes.

It seems no one was more surprised by HP's announcement that it was pulling the plug on the TouchPad than its upstream suppliers, who according to DigiTimes' sources are suddenly suffering from component overload:

The sources pointed out that the inventory level is capable of producing about 100,000 7-inch TouchPads and was originally set to start production at the end of the third quarter, but HP's sudden change of strategy has completely messed up upstream player's schedules.

Solution: Repair relations with your Asian suppliers by pushing those components through the factories. And then give it a positive spin by telling your customers that you are doing it just for them.

Join the Conversation
About This Author
Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

Email | @philiped | RSS
Current Issue
  • Give the gift of Fortune
  • Get the Fortune app
  • Subscribe
Powered by WordPress.com VIP.