Firesale pricing is not a sustainable business proposition. HP nor anyone can sustain the firesale pricing.
Originally Posted by k4ever
Apple has 20 million iPad unit in the wild right now.
Apple and HP have similar BOM (Build of material cost) @ $300 per unit. HP lost approximately $200 per unit during the firesale.
To match Apple's market share, they would lose $4 billion dollars @ firesale pricing.
($200 loss per unit * 20 million units= 4,000,000,000).
As for licensing. If HP licensed webOS to HTC or Samsung @ $5 for unit, HTC/Samsung would need to sell 60 million units to recoup the lost they made on the firesale.
Fire sale expected loss was 300 million ( 60 million units from licensee @ $5 a license = 300 million).
So just looking at the numbers, it would be difficult for HP to compete.
iPad pretty much owns the market. They have a secret sauce that has nothing to do with specs or technical features.
Their secret sauce is "supply chain" and strategic investment.
Remember when we had that oil crisis a few years back and all the airlines were filing bankruptcy. Southwest Airlines hedged their bets and secured future contracts on oil @ $70 a barrel. They were sitting pretty when oil shot up to $140 a barrel. Same analogy at Apple. Apple locked the manufacturing and components. you can Google this information " Apple supply chain logistics".
Some examples: Apple controls 60% of the LCD market; leaving leftovers for the competition.
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Apple’s Secret Sauce Revisited: Strategically Investing in Supply Chain Capabilities | Supply Chain Matters
Apple supply chain strength weakens competition - Logistics
This article, specifically names HP Touchpad as a victime
For one, Apple has exclusive deals with hardware manufacturers for the best parts. This means that HP couldn’t get the same display as the iPad, it could only source the second best. It’s not that HP didn’t want to get the best, or wouldn’t pay for it, it simply was not available to them, period. If HP wanted display technology for production units that rivaled the iPads, it would have to wait until Apple’s exclusivity deals on hardware ran out.
In terms of tablets,the iPad owns the market. Timothy Cook is on record of saying they have market in terms of pricing and they're willing to drop the price at any moment if the competition is in reach. They secured component pricing, over-booked manufacturing where companies like FoxConn spends 23 hours on Apple products and the last hour of the day is being split up between HP, Motorola, HTC,etc.. This is why nobody can really drop the prices less than Apple. The Xoom came out at 800. Apple is making money @ $499 and competitors are finding it difficult to meet price parity. Apple planned this years ago like they did w/ the iPod Nano. The iPod Nano NAND flash shortage was the stroke of genius from Timothy Cook. That whole episode killeed off the Zune, Creative Zen, Sansa and the likes.
Apple is in a good position right now.
Even though they are losing market share to Android, they're still in a different league. Even with 20% of the market, they command 60% of all the profit in the mobile space. Just google it. Their supply-chain procurement is pretty awesome in terms of just efficiency and profits. Furthermore, no other single entity out-sells the iPhone. Yes, as a whole, the Android "army" outsells the iPhone but no single competitor or single phone outsells the iPhone. The highest selling Android phone is the SG2 w/ 5 million shipments last quarter vs the iPhone's 20 million shipment.
While everyone chases to the bottom, Apple is enjoying its profits. They have 76 billion in real cash. The are in a position where they can take scary risks.
Lastly, unlike cellphones, Tablets have different playbook rules. There is no BOGO (Buy one get one free tablets) and there are no carrier subsidies. End users can get a free Droid X @ 2 year contract but they can't get a Motorola XOOM for free. Hence, there has been no real impact. The only company that even has a remote chance is Amazon but reports say they will have to use cheaper components and lower quality materials to even get at the $250 loss leader pricing they want.