The cheapest TouchPad is not the same price as the cheapest iPad.
The cheapest TouchPad will be $100 more than the cheapest iPad.
HP is matching the least expensive Xoom, not the least expensive iPad.
The Xoom had everything it needed to be a hit but was lacking in one spec: price. At $449 like the Acer Iconia it would have sold OK. At $399 it would have matched the Asus Transformer at $399 and been a hit.
In two weeks, the Samsung Galaxy 10 will be thinner, lighter, faster, brighter but at $499 that is too expensive.
Honda, Toyota, Datsun, and then Hyundai and Kia have shown that you can be late to market and have a huge hit. You match or exceed every spec at a dramatically lower price.
So why is the Xoom so overpriced?
The Wall Street Journal estimated the Xoom cost at $278. Foxconn has a 30% gross margin and so sells it to Motorola for $361. Motorola works on a 33% gross margin and marks it up to $480. The retailer marks it up 25% to $600.
The base iPad saves the cost of the 3G and 4G radios, microSD slot, lower def display, and $10 for the extra 16GB so Apple can sell for $499
The Asus Transformer costs about the same as an iPad so Asus is making the best margin selling it for $325 to a retailer who marks it up to $400.
Acer, LG, Samsung, HTC, and Asus cut out Motorola's middle man markup.
HP is caught in the same boat as Motorola. Inventec works on a 30% gross margin like Foxconn. HP needs their cut and so does the retailer. So the TP ends up at $600 like the Xoom.