Whoever said that initially selling the Touchpad below cost would have made HP look desperate doesn't know what they're talking about. This fire sale PROVES that people would have bought it given the right price. Most importantly, investors would have thought HP was "desperate", but they would have been "desperate" all the way to the bank.
Also consider that companies sell their huge product WAY under cost all the time and NO ONE thinks their despearate. For example, Sony and Microsoft were losing about $200-$300 PER CONSOLE at LAUNCH, but everyone realized that this was the way to get people to buy it AND that they'll make the money back on games. Never ONCE was "oh man, they're desperate" entered into anyone's mind... and even if people did think so, it still didn't stop them from buying it.
What people said is what HP should have done, and I've been saying the same thing: HP should have sold it for $200-$250, in order to get people who don't even know what the difference is between all the different "iPads" out there... they don't know enough to care that it's an "Apple" product, they just want something useful and convienent... and fortunately the sub-$300 tablet would have won them over. Again, "what's the difference between the HP iPad and Apple iPad? I'll just get the cheaper one" is what most people would be thinking. Then with that installed base, HP would have made their money back on apps and accessories (and would also have had the money to take it on the chin for a while before the Touchpad profits reached parity with its cost), and then released the new-and-improved Touchpad 2.
This is EXACTLY what Apple does (release a crappy version first, generate buzz, and then blow away people's expectations with the second, third, fourth, etcth version), and look at where they are now.
This is where I thus believe that HP simply didn't care, and that's what hurts the most about all this.