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  1.    #1  
    HP TouchPad Costs an Estimated $318 to Make | News |webOSroundup

    You’ll remember we recently ran a story that the TouchPad was dissected right down to its naked circuit boards. Well, now iSuppli is reporting their cost estimates on building the HP TouchPad… $318 on average. More specifically, $328.15 for the 32GB model and $306.15 for the 16GB model.
    Here's the kicker: the more of these HP sells (and thus orders from the factory) the less they'll each cost.

    Sure they wouldn't make a huge profit on the devices, but they also wouldn't lose money. And what will determine the success/failure of WebOS? The number of people using it.

    Android started out with tons of cheap phones, and now they're selling more than Apple.
  2. #2  
    How are you so sure they wont lose money? ~$40 in revenue =! profit. HP has to pay labor costs, taxes, fees, overhead, etc on each device. Just because the parts are worth a certain amount doesn't mean that the company should have to suffer on profit to try and sell it lower to consumers.
    I am, therefore I think
  3. #3  
    Seriously...that cost is ONLY parts! You have to factor in marketing, labor, software development, etc etc.

    The orginal Palm Pre sold for around $400 retail and it only cost something like $130-$189 in parts to make. So costing $306 and selling for $500 isn't bad. Though $475 would have made a better price point for this first model for marketing purposes and then the 32GB for about $550.

    They went with the $499 and $599 for 2 reasons:
    1. Apple pricing for comparisions
    2. Room for discounts and incentives and later lowering of the price to sell the rest when the next one comes out.

    If everyone followed your idea, companies would go broke. Bad enough most stuff is from China anyways, now you want not to have any USA companies cause they can't afford labor costs and taxes on their headquarters.


    Nokia (red phone) --> Denso TouchPoint TP2200 --> Samsung SPH-N400 --> (Palm VII) --> Sanyo 5150 --> Palm Treo 650 --> Palm Pre --> Sprint FrankenPre 2 --> (HP TouchPad)/(HP Pre 3 - Wifi) --> Galaxy Nexus (with TS mod and hopes of Open webOS!)
  4. nhavar's Avatar
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    #4  
    Quote Originally Posted by 6tr6tr View Post
    HP TouchPad Costs an Estimated $318 to Make | News |webOSroundup



    Here's the kicker: the more of these HP sells (and thus orders from the factory) the less they'll each cost.

    Sure they wouldn't make a huge profit on the devices, but they also wouldn't lose money. And what will determine the success/failure of WebOS? The number of people using it.

    Android started out with tons of cheap phones, and now they're selling more than Apple.
    That's just hardware, you're not accounting for licensing fees to some of the patent holders, storage cost, shipping cost, labor, marketing, retail margin, etc.,. None of those fees are part of the hardware costs. Then you also have to account for the cost of development of the software, testing, and support costs. You have to bake that in plus a profit to make shareholders happy.
  5. lougw's Avatar
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    #5  
    What everyone else said. Plus BestBuy would probably prefer to make a few bucks for their time. So unless HP was only going to sell them direct (a bad idea) you gotta pay the middle man as well.
  6. #6  
    Wow. Will you allow HP to pay the people who actually manufacture it as well? And the people who do R&D? What about packaging?

    Because these things cost as well. Otherwise you have a bag of electronics parts, and not a device. After THAT we can talk about profits.

    I'd like a TouchPad for free, too. But this isn't that sort of world. We wanted capitalism, we got capitalism. Now we have to deal with capitalists wanting to make fat profits (AND disrespect our privacy in all the ways our politicians were telling us the communists would do).
    sketch42 likes this.
  7. #7  
    Quote Originally Posted by GodShapedHole View Post
    Wow. Will you allow HP to pay the people who actually manufacture it as well? And the people who do R&D? What about packaging?

    Because these things cost as well. Otherwise you have a bag of electronics parts, and not a device. After THAT we can talk about profits.

    I'd like a TouchPad for free, too. But this isn't that sort of world. We wanted capitalism, we got capitalism. Now we have to deal with capitalists wanting to make fat profits (AND disrespect our privacy in all the ways our politicians were telling us the communists would do).
    The profits are fat because of demand, not because most things are necessarily overpriced. Anyone who understands basic costs/revenue/profit functions realize that as production reaches a certain level, the cost per device goes down and profit increases without having to adjust price or expenses.

    People always go on about capitalism as if it's some sort of 3-headed monster out to destroy people's lives. It's an economic system that some know how to work and others do not. Unfortunately, most people don't and they are not the ones who see the major financial benefits of capitalism.

    In the end, everyone decides with their wallet =)
    I am, therefore I think
  8. nhavar's Avatar
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    #8  
    Quote Originally Posted by GodShapedHole View Post
    Wow. Will you allow HP to pay the people who actually manufacture it as well? And the people who do R&D? What about packaging?

    Because these things cost as well. Otherwise you have a bag of electronics parts, and not a device. After THAT we can talk about profits.

    I'd like a TouchPad for free, too. But this isn't that sort of world. We wanted capitalism, we got capitalism. Now we have to deal with capitalists wanting to make fat profits (AND disrespect our privacy in all the ways our politicians were telling us the communists would do).
    OOOH we need the "bag of electronics" option. Shave $100 bucks off and send me the bag.
  9. #9  
    We really need a "</3 Dislike" button to accompany this new "<3 Like" button...
  10. gabe2gg's Avatar
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    Why wouldnt HP sell for a loss to make the TP cheaper in order to increase the marketshare and to get developers on board. Yes you are losing money, but you are also giving developers a good reason to develop for Webos. Look at the PS3 for a good example. Then again Playstation was already a known brand.
  11. #11  
    Quote Originally Posted by gabe2gg View Post
    Why wouldnt HP sell for a loss to make the TP cheaper in order to increase the marketshare and to get developers on board. Yes you are losing money, but you are also giving developers a good reason to develop for Webos. Look at the PS3 for a good example. Then again Playstation was already a known brand.
    Gaming consoles are notorious for operating at a loss because of the business model they follow to reap revenue and profit after the purchase of the device itself, Microsoft is the same way as Sony; I think only Nintendo didn't operate at a loss with the Wii. Perhaps tablets could follow a similar business model but I doubt it. Until a company can ensure developer support like traditional consoles as well as reap higher margin from software (i.e. console games & paid application), I don't see this working out so well for a tablet division.
    I am, therefore I think
  12. #12  
    Quote Originally Posted by gabe2gg View Post
    Why wouldnt HP sell for a loss to make the TP cheaper in order to increase the marketshare and to get developers on board. Yes you are losing money, but you are also giving developers a good reason to develop for Webos. Look at the PS3 for a good example. Then again Playstation was already a known brand.
    im almost 100 percent sure the 16GB touchpad is sold for a loss once you consider the other costs associated with delivering a product.

    also I dont think is the PS3 is the best example. First off, up until the wii, all consoles were sold for a loss, with profits made on software sales. Second, despite the ps3 being sold for a loss, it was still perceived to be overpriced and didnt sell well or get 3rd party support initially. It also marked sony's fall from the videogame thrown. A better example would be the xbox360. That console came from dead last in the previous generation and never making a profit to being a full fledged powerhouse in the industry.
    Last edited by Mhunterjr; 07/07/2011 at 04:00 PM.
  13. Mize's Avatar
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    #13  
    Quote Originally Posted by gabe2gg View Post
    Why wouldnt HP sell for a loss to make the TP cheaper in order to increase the marketshare and to get developers on board. Yes you are losing money, but you are also giving developers a good reason to develop for Webos. Look at the PS3 for a good example. Then again Playstation was already a known brand.
    You know, when you lose money on every unit you can't make it up in volume.

    Certainly HP could take a loss-lead position in an attempt to get market share and developers on board, but that has to be planned with a profitable product on deck and specific triggers (based on losses and lack of market capture) for when they stop the bleeding. It's a very risky road.

    It's also not likely, as someone else said, that HP can reduce costs significantly with higher volumes. The TP is right around the cost mark of the iPad2 at about $328 so they might get to $300 but no more as Apple has the maximum volume discounts out there for ordering in the tens of millions.

    At a direct-cost of $328 the 32 GB TP is at a 45% gross margin and probably gives about a 7-12% net profit before taxes after overheads and G&A costs...maybe as high as 15%, but I doubt it. Let's be rosy and say it's 15%...that means the loss point is about $510.

    With that said, selling it for $499 isn't a bad idea if it will really take market share. You then have to spend like a madman to get your message out about webOS, more memory, yadda yadda and try to get a critial app that the other guy doesn't have.

    Seems like HP wants a small, but profitable, chunk of the market rather than a larger, riskier, potentially loss-making piece of the pie.
  14. #14  
    This is why I'm boycotting the touchpad until HP comes to their senses and drops the prices.
    Apple can get away with over pricing because of their reputation and the sheep that follow Apple. HP doesn't have the sheep or reputation... yet.

    Look... Xbox and PS3 are sold at a loss. Microsoft and Sony make no profit on the units themselves. They make all their profit on Accessories and games.

    HP needs to follow this business model,
    1)They need to sell the touchpad for none to very little profit.
    1a) This will put a touchpad in the hands of many many many many many more customers.
    2) Then they should then post their sales "We sold 10 million touchpads for $300 in 2 months! woo hoo!"
    3) Developers will see this and be like "Woah! 10 million users! I need to port my apps over ASAP!" ....and the snowball of progress and happiness begins.
    4) Now people have more apps to purchase! Huzza!
    5) HP sits back and makes money, while people are happy with their touchpads.

    HOWEVER, HP is stupid and has decided,
    1) "Lets sell the touchpad at the same price as the superior ipad2"
    1a) Because of the high price tag, non-webos enthusiasts will not even bother with the touchpad because it's unheard of.
    1b) Also by selling it at a high price, They are only marketing those that do have $500 to pee away on a luxury item
    2) Sales are low due to no one has heard of it and lack of apps, lack of hardware does not value it at the pricetag.
    3) Developers laugh and say "Glad i'm not wasting my time with WebOS Development"
    4) HP makes promises of more apps to come by next year
    4a) HP laughs because they know that's not going to happen
    5) HP comes out with a new touchpad, which is outdated in hardware, but to make things right you can get the most expensive model at 7% off only if you bought the first one and still have the UPC code.
    6) The cycle repeats.
  15. #15  
    Quote Originally Posted by janter View Post
    This is why I'm boycotting the touchpad until HP comes to their senses and drops the prices.
    Apple can get away with over pricing because of their reputation and the sheep that follow Apple. HP doesn't have the sheep or reputation... yet.

    Look... Xbox and PS3 are sold at a loss. Microsoft and Sony make no profit on the units themselves. They make all their profit on Accessories and games.

    HP needs to follow this business model,
    1)They need to sell the touchpad for none to very little profit.
    1a) This will put a touchpad in the hands of many many many many many more customers.
    2) Then they should then post their sales "We sold 10 million touchpads for $300 in 2 months! woo hoo!"
    3) Developers will see this and be like "Woah! 10 million users! I need to port my apps over ASAP!" ....and the snowball of progress and happiness begins.
    4) Now people have more apps to purchase! Huzza!
    5) HP sits back and makes money, while people are happy with their touchpads.

    HOWEVER, HP is stupid and has decided,
    1) "Lets sell the touchpad at the same price as the superior ipad2"
    1a) Because of the high price tag, non-webos enthusiasts will not even bother with the touchpad because it's unheard of.
    1b) Also by selling it at a high price, They are only marketing those that do have $500 to pee away on a luxury item
    2) Sales are low due to no one has heard of it and lack of apps, lack of hardware does not value it at the pricetag.
    3) Developers laugh and say "Glad i'm not wasting my time with WebOS Development"
    4) HP makes promises of more apps to come by next year
    4a) HP laughs because they know that's not going to happen
    5) HP comes out with a new touchpad, which is outdated in hardware, but to make things right you can get the most expensive model at 7% off only if you bought the first one and still have the UPC code.
    6) The cycle repeats.
    Your first scenario is a bit flawed. There are far too many conditions that need to be met before a "success" would be made out of the Touchpad.

    IF it's priced lower, people will buy. IF people buy it, we can tote high sales numbers and more people will pay attention. IF we have a high number of devices out and more attention, the developers will follow with quality apps. IF this all happens, we will make a killing on accessories and app fees.

    I'm not convinced this would be the appropriate business model for a tablet that is meant to try and gain 2nd place in consumer mind-share and market share.
    I am, therefore I think
  16. gbp
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    #16  
    Folks the numbers are a bit high. I believe it will be 10% - 15% less, i.e. a 16 gig one might be $260.00 - $ 280.00 while the 32 gig one is around $ 270 - $ 290.

    The32 gig NAND price was shown as $ 45.00 , I bet HP can get them for $ 35.00. Just check the price of 32 gig at Amazon or in ebay

    The LCD panel and glass screen were costing $ 69 and $ 63, I bet HP might have paid $ 50 bucks each. The panels are exactly the same as Apple's iPad, so there is a room for negotiation. Last time I was planning on replacing LCD panel on my old Sony, it was 15 inch and costing me $ 90.00.

    Just check the LCD panels for 10 inch Acer at ebay

    Nothing in these parts is special or proprietary. Just out of the box memory,LCD and gorilla glass.

    When you order a million pieces of these you do get huge discount. So back on the topic I believe HP still makes them 30 dollars cheaper.
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  17. gbp
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    #17  
    Quote Originally Posted by janter View Post
    Look... Xbox and PS3 are sold at a loss. Microsoft and Sony make no profit on the units themselves. They make all their profit on Accessories and games.
    Sony started making profit on PS3 since 2009.
  18. #18  
    Bill gates last big product before he left... Xbox360.

    He felt it was a necessary market to get into...
    He said from the start it will not make money for years...
    He understood... And now look where they are now.

    HP can certainly have sold the tp $100 less at all models.
    IMO they were best to do so... The tp is first gen... Ipad1 territory...
    They could afford to sell $100 cheaper and get volume out.
    2nd gen with specs to match the rest... They could raise at that point.

    Quote Originally Posted by gabe2gg View Post
    Why wouldnt HP sell for a loss to make the TP cheaper in order to increase the marketshare and to get developers on board. Yes you are losing money, but you are also giving developers a good reason to develop for Webos. Look at the PS3 for a good example. Then again Playstation was already a known brand.
  19. #20  
    $400 is a very competitive price. The cost to make the piece of hardware costed $306 but the problem is that advertising costs millions of dollars more than you think it does and the money that goes into making the software is another few million dollars. They would be selling it at a loss if it were $350. What they could have and should have done is sell the 32GB version for $50 more than the 16B version. Everyone, and I mean everyone, would spend an extra $50. That means they would be making much more overall.
    "Life is Hard... it's harder if your stupid"
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