Is $99 the magic number for tablet computers?
Tech giant Hewlett-Packard Co. couldn’t sell its TouchPad tablets until it reduced the price to $99, slashing hundreds of dollars off the original cost. Then they flew off the shelves.
The wildly popular promotion, in the wake of HP announcing that it was quitting the tablet business, may have some people thinking that $99 is the tipping point, when tablets will shift from being the coveted gadget of the few to an accessory that almost everyone has, like a cellphone or laptop computer.
But for now, analysts say, $99 is not a realistic retail price for a tablet computer that isn’t a toy.
“The TouchPad was an anomaly in the market,” said Rhoda Alexander, director of monitor research at IHS iSuppli. “They are exiting the market and they’re losing a lot of money by selling the tablets that cheap.”
An HP TouchPad includes more than $300 in component parts, according to a tear-down analysis by iSuppli, not including software or labor costs. That’s similar to the $326 worth of parts in the runaway bestseller among tablets, Apple Inc.'s iPad 2.
“From a manufacturing standpoint, there is no way you can make a quality tablet for $100 right now,” said Kevin Wiens, co-founder of teardown expert iFixit. “It’s basically impossible. The cheaper tablets out there are very, very poorly made.”
The iPad — which had 85% of global tablet sales last year, according to ABI Research — now starts at $499, and analysts say it will probably remain at or near that price for the foreseeable future.
The HP Touchpad, pre-fire sale, was priced at $399 for the basic model.
But as tablets continue to expand their appeal beyond tech enthusiasts to average consumers, there is growing incentive to offer a good product at a more affordable price.
Price now ranks as the top consideration for 65% of people shopping for a tablet, according to a recent survey from Forrester Research. But shoppers might not have a realistic view of how much the devices cost in stores.
Those participating in the survey expected to pay an average of $257 for a tablet, perhaps because that’s around the price some e-readers cost.
But reality might meet expectations for tablet prices before the year is out.
Tony Berkman, chief executive of ITG Investment Research, said the demand is so strong that brands other than Apple might roll out a small selection of tablets in the $200 to $300 range for the upcoming holiday season. One electronics company, Lenovo, said this week that it will debut a $199 tablet at the end of September.
“Within a year, we’ll start seeing quite a few decent tablets in that price range for sale,” Berkman predicted.
Amazon, which is rumored to be rolling out a tablet of its own this fall, is the biggest contender for offering a good product on the cheap, analysts say.
“Amazon could sell a tablet at cost, or even at a loss, because they think they can make money through selling digital content,” Berkman said. “Or other companies can sell at a loss because they want to grab a piece of the market.”
Amazon has declined to comment on the rumors.
The cheaper tablets probably would not have all the bells and whistles of the current top models, Berkman said. But iSuppli estimates that by 2015, tablets in general will fall to an average price below $300.
“I wouldn’t totally rule out someone offering a good tablet for $100 in a few years,” Alexander said. “The market is changing fast.”
Michelle Lapid, 22, of Hawthorne was not willing to wait. After the $99 TouchPad was announced and quickly became a hard-to-find item, the recent Cal State Northridge graduate went on what she described as a “crazy bargain-hunting fever” search for one, going through three tanks of gas in four days.
It finally paid off. A friend who works at a local Best Buy tipped her off that a shipment of TouchPads might be coming to the store. “I had to get in line at 4 a.m.,” she said, “but it was worth it. I’m so happy.”
Others might still get the chance. HP said earlier this week that it was going to release one more batch of TouchPads, but the company would not say how many would be coming.
And HP would not say whether the new TouchPads would be sold at the magic $99 price.