What really makes money in our Information Age? Software. What’s the best way to sell software? Sell a hardware device that only runs your software. Apple, and their tens of billions of dollars in revenue each month is a poster child for this line of thinking. The xbox 360 and PS3 are even better examples of hardware sold for a loss initially in order to lock in consumers for software sales.
HP could have gotten in on the pie if they had been a little (a lot?) smarter.
Just recently, last Friday, HP decided to stop making phones and tablets using an operating system known as “WebOS” that they acquired along with its creator Palm about a year ago for $1.2 billion. WebOS is similar to iOS (iPhone, iPad) and Android in purpose but offers a few unique features like multitasking, for which it was built from the ground up. In getting out out of the business, HP decided to take a huge hit on their Touchpad (iPad competitor) hardware, essentially writing it off to the tune $100 million, and sell it at epic price points of $99 and $149.
Just like that, their Touchpad became the tablet to get. It couldn’t move at $400 (16GB)/$500 (32GB) but boy did people overload HPs website and beat each other up in Wal-Marts over it at this price. It is a bit ironic that the day HP announces the end of the product that it becomes an item that no one can keep in stock. It’s likely that the active webOS 3.0 userbase grew by an order of magnitude over the weekend, no joke.
They question becomes – why didn’t HP take a loss to move the hardware in the first place? Remember at the beginning when we talked about how software makes the world go around anyway… not to mention $40 cases and $70 “touchstone” chargers. If the Touchpad would have come out at say, $150 and $200 based on capacity it would have been nearly as a big of a hit and would have attracted 1)many buyers and then 2)many app creators and then the classic 3) profit.
Instead, HP thought that for some reason people would buy their tablets at iPad prices despite lack of brand recognition (webOS? wtf?), lack of apps, and hardware that is not freaking blessed by Steve Jobs. It was born to be a loser with that plan.
No wonder HP stock dropped 20% on last Friday, the leadership of HP showed everyone just how dumb they really are.