The iPad wars: HP TouchPad sale burns Apple's foes

August 31, 2011 4:43 AM EDT

In a triumph of madness over common sense, HP says it will manufacture one more batch of its loss-making TouchPad tablet "to meet unfulfilled demand," but won't say how many or when they will ship: no great surprise when you think about just how much cash HP has already lost competing with Apple [AAPL] and its iPad juggernaut. Meanwhile -- has Apple really lost an iPhone 5 prototype again?

[ABOVE: An HP TouchPad -- the anti-iPad tablet killer.]

Suicide is painless

It has to be as obvious as the world being round that HP is losing a huge amount of money selling TouchPads at just $99 per unit. 

There's no way you can even acquire the components used in these machines at prices as low as these. When you factor in manufacturing and shipping/distribution costs, all HP is doing is cutting its losses -- while starving everyone else in the anti-iPad market of what little oxygen remains by offering a device with features and at a price competitors can't conceivably match.

If Apple's sobbing non-iPad tablet-making competitors thought things were bad already, HP's low-cost giveaway move made things worse. There must be hundreds of thousands of unwanted tablets from sundry manufacturers filling up the distribution chain: making a Holiday season price war inevitable. In other words, HP's decision to sell its tablets at a loss will eventually be emulated by all Apple's other competitors.

Spend, spend, spend

These firms must be addicted to losing money in their battle with Apple -- word out of Taiwan even claims some vendors are already planning new models for the Christmas market. Asustek, Acer, Dell, Lenovo and Amazon are all preparing to bring new tablet models to market. And of these only Amazon can offer a feast of available content to make its device an even slightly interesting proposition.

I'm expecting a bloody price war. Why? Apple has the hearts and minds of the consumer market with its iPad. Android tablets lack the rich, apps market Apple enjoys; devices from other makers strive to even equalize what's available for Android devices, with Apple app availability just a distant dream. In other words, Apple has the device people want with a the vast array of available apps to help make each iPad unique to the person that owns it.

iPad competitors will be combating each other for the smallest slice of the market. HP's recent move to sell $99 TouchPads means many consumers already have a device they can use for the next year or so. That reduces potential sales numbers, and creates an expectation that non-iPad tablets aren't worth much money. All vendors will feel this pricing pressure.

[ABOVE: Unwanted PCs heading for landfill -- at least all those non-iPad tablets will take less space. c/o: Greenpeace.]

The drowners

The problem grows worse when Amazon will steam in using all the clout of its online marketing power. That company is expected to offer its own tablet at a price lower than that of Apple's iPad.

You'll see tablet makers struggling madly to sell devices at price points which only barely cover their costs. If pressed, Apple has the nuclear option of dropping iPad prices in order to further starve the market. Amazon will be seizing as much oxygen as it can, shunting devices from other makers and OS developers to the sidelines.

The end result will be that after a disappointing Christmas quarter executives in boardrooms outside of HP will also be asking if it is worth losing money in a market Apple owns. And Apple will be planning to raise its game again with the introduction of the iPad 3.

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