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HP Brings TouchPad Back From the Dead

Sarah Thomas
8/30/2011

HP Inc. (NYSE: HPQ)'s webOS-based TouchPad isn't quite dead yet. The company plans to manufacture another batch to meet "unfulfilled demand" for the tablet, following its price drop from $499 to just $99 last week.

Along with its third-quarter earnings earlier this month, HP announced it will no longer build the hardware for any webOS devices, including the tablet, while it pondered what to do with its mobile devices unit, the Personal Systems Group (PSG). But, the company updated a blog post Tuesday saying it would produce one last run of TouchPads owing to unfilled demand, although it doesn't know when the units would be available or how many it would get. (See HP Shuts Down WebOS Device Biz and OS Watch: Who Wants WebOS?)

"The only “unfulfilled demand” was for a product that was being sold at unsustainably low, money-losing, fire-sale prices," jibes tech reporter Dan Frommer.

They say
Frommer isn't the only industry observer not buying the consumer-demand theory. HP issued the update after the DigiTimes reported that upstream suppliers are suffering from a component inventory surplus following the company's decision to halt production. Rather than building more TouchPads, HP could just be using up the parts its suppliers have lying around for them.

Boy Genius Report blogger Zach Epstein suggested that it wouldn't make sense for HP to build, ship and sell TouchPads at a loss just to satisfy existing contracts when it could agree on a lump payment instead. But, InformationWeek reporter Eric Zeman points out that it could be cheaper for HP to do so, rather than renege on its contracts, not to mention risk hurting its supplier relationships.

Components issues aside, HP did see overwhelming demand for the TouchPad once it dropped prices. The company sold out of the device across retailers in record time. The fire sale couldn't save its margins, however, as the tablet will cost the company more than $100 million owing to a $0.05 charge per share. (See Lessons From the $99 HP Tablet Rush.)

We say
HP doesn't seem to know what it wants to be when it grows up. Further clouding its strategy, its head of PSG, Todd Bradley, tells Reuters he prefers the company spins off PSG, leaving him as CEO, rather than sell the company to a competitor. He also claimed there may be a place for the TouchPad again in the future tablet market, which he says is still relevant to HP.

But the more apt question has already become, is HP even still relevant to the tablet market?





— Sarah Reedy, Senior Reporter, Light Reading Mobile

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paolo.franzoi
paolo.franzoi
12/5/2012 | 4:55:03 PM
re: HP Brings TouchPad Back From the Dead


Okay here is a theory....let's say you were a producer and HP exited out of your custom product.  Which poof you write off because now the demand has dropped to zero.


This writeoff now causes the inventory value to be 0.  Now, HP figures out that it has spare inventory of a bunch of the parts but is missing some bits.  Or maybe IT had the custom parts and has written them down to 0.  So, it buys all the 100 ohm resistors required to make the finished product and voila it MAKES money at $99 (cuz the product now only costs $3 to make).


Before you laugh, I have seen people reuse written off inventory before and that would make sense if they had a bunch of WIP and parts they were writing off.


seven


 

DCITDave
DCITDave
12/5/2012 | 4:55:03 PM
re: HP Brings TouchPad Back From the Dead


I think that theory is sound. HP might have seen a chance for a quick profit after declaring its inventory to be worthless (on paper).


I find it odd that they see no long-term future in getting consumers using WebOS devices. That ecosystem, no matter how cheap the tablets, phones, etc., is worth something far more valuable when they can build hooks into enterprise products/apps, HP's printer biz, PCs, etc.


Still think HP's leadership is a little nuts, but maybe they've got some good accountants.

DCITDave
DCITDave
12/5/2012 | 4:55:03 PM
re: HP Brings TouchPad Back From the Dead


It just shows you what a mess HP is from the top down. No graceful exit to the tablet market. No consumer testing of price elasticity before killing off a product. When it comes to consumers, HP just doesn't know what the hell it's doing. Or, maybe, it's new CEO doesn't want to know.


ph

rzerockzeron
rzerockzeron
12/5/2012 | 4:55:02 PM
re: HP Brings TouchPad Back From the Dead


not that I am laughing or surprised by your theory, but would that constitute a major accounting fraud? I kindda remember Enron, Worldcom, Nortel ya know...


 


Maybe The DOJ should investigate this 'rebirth'

paolo.franzoi
paolo.franzoi
12/5/2012 | 4:55:01 PM
re: HP Brings TouchPad Back From the Dead


 


No, if you have written down inventory to zero (aka already taken the writeoff) then the value is 0 for accounting purposes.  What I am describing is normal accounting behavior.


seven


 

krishanguru143
krishanguru143
12/5/2012 | 4:54:58 PM
re: HP Brings TouchPad Back From the Dead




There are two problems.

 

1)      They cannot do a write-off; they could do a write-down though.  Most if not all of that inventory is worth something and thus you cannot perform a write-off.  The CPU would be an off the shelf component and could be used in something else.  Surely some manufacturer would be more than willing to buy that inventory at a discount.  The same would go for the Flash components.  What company isn’t using Flash components?  The display might be a custom size and finding a buyer could be difficult but not impossible if the price was right.

2)      If they did try to do a write-off and then use the components in the same quarter, they could be in for some scrutiny in their bookkeeping.  You can’t declare something as worthless today, write it off and then use it the following day.  Even if they did do that and wrote the components off, they are making pure profit on every unit sold as essentially the components were free.  Why don’t you write your house off and declare it worthless and then sell it?




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