webOS - The Fire Sale!

It has been a strange couple of days for HP (Palm) and their mobile operating system webOS. On Thursday last week we received the news that HP would cease production of webOS hardware only 40 days after releasing their first product, the TouchPad tablet. This was great shame, as although the tablet was released to mixed reviews, I think everyone saw its potential and in my opinion (having used a number of Android tablets) it was already the second best tablet on the market, behind the iPad.

 

Unfortunately none of this matters now, as HP have clearly stated that their dip into mobile hardware with webOS is over. So the real question is, what happens to the estimated 1 million TouchPad tablets that were shipped to retailers across the US, Canada and the UK? Surely you would have to be crazy to buy one now for the £400 price tag...but what if I said you could pick one up new for just £89?

Well that is exactly what happened, on Sunday BestBuy in Canada and the US dropped the price of the TouchPad to just $99, with the UK following close behind on Monday with a price drop to just £89! That means you could buy a tablet that was previously being sold for £400 just one day earlier, for approximately 20% of the original price.

Unsurprisingly the Internet went crazy and within seconds of the price drop hitting the web, retailers across the world sold out of every TouchPad. In fact, the sudden surge of interest was so great, that major UK retailers web sites such as Dixons, PC World, Currys and The Carphone Warehouse, were all brought to their knees, in a DDoS style attack. Now obviously these devices were being sold at a loss, however I think everyone (including HP) were caught off guard by just how popular the TouchPad would be at this price point.

So this makes me wonder, should more tablet manufacturers sell their product at a loss to gain valuable market share, similar to how the games industry operates? For example, on Saturday it was believed that HP had sold as little 20,000 TouchPad tablets, however just two days later they have likely sold close to 750,000, with numbers expected to rise as other retailers sell off their remaining stock. Suddenly out of nowhere, the TouchPad has a modest user base and as Apple have proven it's the user base that unlocks other revenue streams, such as music, applications, games, advertisement and other services. Therefore what if HP continued to sell the TouchPad at a loss until they reached 2 million users, at that point they could aggressively go after developers in the hope to start creating the webOS ecosystem. They would then be in a position to release a new TouchPad, but in the knowledge that users have already invested in the webOS platform and therefore become tied to it.

This is exactly the same business model as Apple, by getting users to invest in the App Store, iTunes and iBooks, so they are tied to the platform going forward. The big difference with Apple is that users are also willing to pay a premium for the device, something that I believe is unique to the Apple culture.

So will this new found interest cause HP to change their minds about webOS? I think the answer is no. But it might make other tablet manufactures think about following the games industry model by selling at a loss to gain market share.

Finally, what about those people that actually bought a TouchPad? Personally I think you got a great deal, because even if HP completely drop support for webOS and no other company picks it up, there will still be a hardcore "cult of Palm" developer community driving forward through homebrew, which happens to be very simple to enable on webOS devices ;-)