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Hewlett-Packard (NYSE:HPQ) last week waved the white flag for tablets and smartphones based on its HP webOS operating system.
Anyone thinking Research In Motion (NYSE:RIMM) or other OEMs are doing the same against the rising tide of Apple (NASDAQ:AAPL) iPads, which command over 80 percent of tablet market sales worldwide, would be mistaken.
Motorola and Samsung did not respond to questions about whether or not they plan to discount their Motorola Xoom and Samsung Galaxy Tab 10.1 slates, respectively.
RIM, which is also struggling to compete against the iPhone and handsets based on Google’s Android platform, told Forrester Research analyst Sarah Rotman Epps the company stands fully behind its BlackBerry PlayBook and the QNX operating system that powers it.
Epps quoted Robert Crow, vice president of industry and government relations for RIM: “This is our platform, and this is our future,” said Crow, referring to the QNX platform generally and PlayBook device specifically. “We stand 100 percent behind it.”
That’s a strong testament, and a bold bet RIM has placed on the future, which also includes QNX-based superphones for early 2012.
But the tablet market is different. No one will confirm this, but Best Buy reportedly saw tepid HP TouchPad sales of only 25,000 to 50,000 units. Apple’s iPad has sold some 30 million units. Clearly, HP believed it was too far behind in the market to make a difference.
The company also reportedly lost somewhere between $140 million and $300 million on building the TouchPad, which is selling for $100 a pop at Best Buy and most other places that deigned to carry the tablet. And by all accounts, these devices are selling super fast.
Which brings to mind the obvious question: Should Android OEMs and RIM begin severely discounting their slates? Supposedly, the PlayBook has sold between 500,000 and 1 million units, while Android “Honeycomb” and other Android tablets may have sold 1.5 million units total. Reasons for the tepid sales are the bugginess of software in both the Android tablets and the PlayBook, as well as the paucity of applications for both platforms.
Considering that consumers can buy PlayBooks and Xooms for under $500, compared with $500 for an iPad 2 with a proven clean software track record and over 100,000 apps, it’s no shocker that analysts commonly refer to the tablet market as the “iPad market.” People don’t want other tablets; they want iPads.
Should iPad Rivals Sharply Discount Their Products?
But what if RIM and Android OEMs, such as Motorola and Samsung, sharply discounted their products to saturate the market and gain ground versus the iPad? Perhaps, but $100 is not a tenable price point when tablets cost $300 to $500 to build, analysts agreed.
“No one can make any money selling a $100 tablet,” industry analyst Jack Gold told eWEEK. “You can’t build them that cheaply (at least, not with any quality or performance). And it’s unlikely you can make up the difference with services (it’s not like printers where HP and others give away the printers and make it up on ink/toner).”
Gartner analyst Carolina Milanesi agreed, noting that the $100 TouchPad price point is simply about getting rid of surplus stock.
“This is certainly not the way to run a viable business,” Milanesi said. “We have been saying for a while now that Apple’s competitors need to provide value beyond hardware especially given that they cannot compete on the hardware price.”
Gold agreed, noting that non-iPad tablets haven’t sold because they can’t compete with the overall experience of the iPad.
“No one has been able to match the experience (or perceived experience) of the iPad,” Gold added. “Having said that, there is no question that longer term, the gap between iPad and the rest will narrow considerably and probably disappear. Competitive pressures being what they are, once a product is released, your competition quickly tries to copy your success. And with all of the vendors (especially in the Android space) trying to copy Apple’s success, eventually they’ll get it right/get it close enough to win customers.”
At least, that’s what Android OEMs, RIM and eventually Microsoft, when it brings its Windows 8 tablets to the table, hope.
Milanesi said prices would have to drop 30 percent under the iPad to make consumers consider an iPad alternative today or remain competitively price if the platform ecosystem offered was comparable to Apple’s App Store.
For Android, salvation may come in the form of Amazon.com’s tablet, which could be less expensive than the iPad and provide a comparable content platform of movie, music and application content. Epps is among a cadre of analysts who believe Amazon could sell a low-cost Android tablet priced at $250 to $300 and make up the difference in content and application sales, or advertising.