HP Inc. Will Exit Low-End Tablet Market

Company officials say the vendor will focus on higher-price, higher-profit devices that target such business segments as retail and health care.

HP tablets

HP Inc. is getting out of the low-end tablet market, opting instead to focus on higher-cost, higher-profit devices.

The company has a healthy list of tablets on its Website that run as high as $1,499 (for the new Elite x2 1012 G1 tablet, powered by Intel's Core m5-6Y54 processor and running Microsoft's Windows 10 Pro 64 operating system), but the two remaining low-end Android-based tablets—the $99.99 HP 7 G2 and $149.99 HP 8 G2—are out of stock. Most of the tablets on the list run Windows.

HP officials say they are turning their attention more to devices aimed at the commercial market.

"We are going to focus where there is profitability and growth and will not chase the low-end tablet market," Ron Coughlin, president for personal systems at HP, said in a statement sent out to journalists this week. "We are focusing on business mobility to deliver tablets built for field service, education, retail and health care."

The tablet market saw some boom years after Apple introduced the first iPad in 2010, growth that has caused a well-documented decline over the last several years in the number of traditional PCs that are shipped worldwide every year.

However, in recent financial quarters, tablet sales have slowed as PC makers have rolled out a range of new form factors, including two-in-ones—which can be used as either a tablet or a traditional PC. IDC analysts this week said global tablet shipments will hit 211.3 million units this year, an 8.1 percent drop from 2014.

They said detachables—tablets that can be used with detachable keyboards—will be a growth engine for the market going forward.

"We're witnessing a real market transition as end users shift their demand toward detachables and more broadly toward a productivity-based value proposition," Jean Philippe Bouchard, research director for tablets at IDC, said in a statement. "The proliferation of detachable offerings from hardware vendors continues to help drive this switch. We're starting to see the impact of competition within this space as the major platform vendors—Apple, Google and Microsoft—now have physical product offerings."

The combination of the good price points—including some costing less than $100—and more innovation will help double the size of the detachable segment next year, with more than 75 percent growth in 2016 compared with 2015. Apple's iPad Pro could help. The device, announced this fall, comes with a larger 12.9-inch screen as well as a detachable keyboard and stylus.

However, analysts with ABI Research said this week that they expect tablet shipments in the fourth quarter will hit 40 million units, up from 30.6 million in the third quarter. New tablets continue to be introduced to the market in time for the holiday shopping season, according to Jeff Orr, research director at ABI.

"Vendors are hoping to gain back some of their unit and revenue shortfall from earlier in 2015," Orr said in a statement. "New tablets from Amazon and others will utilize a low-cost approach to achieve this strategy."

HP won't be among those peddling new low-cost tablets. The company since 2013 has been offering low-cost Android tablets, hoping that the low prices would help generate high volumes of sales. The focus now is on higher-cost devices. Among the lower-priced devices is the Envy Note 8, which is powered by Intel Atom systems-on-a-chip (SoC), runs Windows 10 Home 64 and sells for $329.99, and the Android-based Pro Slate 8 tablets, which run on Qualcomm Snapdragon 801 SoCs and sell for $449 and $469.

Hewlett-Packard on Nov. 1 officially split into two companies, with Hewlett Packard Enterprise selling enterprise IT solutions—such as servers, storage devices, networking gear and cloud offerings—and HP Inc. focusing on PCs and printers.