HP's Touchpad success is a warning to iPad rivals

HP’s decision to flog off all its Touchpad tablets at bargain basement prices is teaching the industry the sort of lesson that many Apple rivals do not want to hear.

HP flogged its Touchpad for £89 because it did not want it hanging around any more. Not surprisingly it was a huge success. But it did show that tablets will sell if the price is cheap enough. OK, £89 is an offer you could not refuse, but think how many tablets are on sale for £400 which is dangeriously close to Apple’s pricing.

Generally it costs about £180 to make a tablet. Jobs decided that he would add a huge mark-up and perhaps get a few subsidies from phone companies.

Jobs could do that. He has a legion of fanboys who will buy whatever he asks and a Tame Apple Press primed to release rubbish about what value for money it is.

The other iPad makers have none of these things. They are also stuck with the problem that in copying Jobs they are producing more or less the same product for the same price. The tablet is still a product waiting for an application. It remains a keyboardless netbook.

iPad rivals need to understand that they have a free and simple operating system which mirrors anything that Apple can do – all they need to do is push the cost of the tablet way down, perhaps getting a few subsidy deals with phone companies. The price they should be aiming for for a reasonable tablet is about £250 with cheap and cheerful models around £100-£150. They could then make money back with application stores or other content deals.

What the manufacturers have tried to do, and they are continuing to do it, is keep prices up to improve margins. Falling margins is one of the reasons why HP wants to get out of the PC business.

However, the lower prices of PCs is here to stay, particularly in the current economic climate, it is better for manufacturers to set up partnerships so that they can flog their gear even cheaper.

The message of HP’s fire sale is that the cost of the tablet is too high and to get the tablet accepted, people are going to have to sell a lot of them first.

Manufacturers are doing the same thing to the Ultrabook, which actually are a more sensible alternative to tablets. Intel has warned them that they are trying to ship the technology at a price too high to be adopted. But they do not seem to be listening.