HP’s Touchpad Turnaround is False Hope; Three Reasons Why
ANALYSIS: HP's turnaround is impressive but it won't last and the company is still in a huge mess.
(IBTimes) -- 08/22/2011 --

HP's Touchpad sale has sparked an incredible turnaround for the once dismissed tablet but this momentum is unlikely to last.

The fire sale, which saw the price go from $399 to $100, comes only days after HP announced it was spinning off its PC business and cutting off production of all current webOS devices. The announcement, along with an acquisition of an infrastructure software company by the name of Autonomy, caused HP's stock to drop dramatically from $29.46 to $23.86, 20 percent, at the end of day Friday.

However, with the price cut of the Touchpad, HP's stock has shot up 0.85 cents per share or 3.60 percent.  After HP announced the sale, retailers such as Best Buy, Office Depot, Staples, and Walmart decided to partake in it as well.

Sales have been so impressive in the early stages. HP has announced it was out of inventory as did other retailers.  Even on Amazon, which didn't cut the price of the tablet, the tablet was listed the number one best seller topping Amazon's own Kindle and the iPad.

Yet, even as the tablet continues to sell in great numbers, one should be weary of calling this the cure to HP's problems. Here are three reasons why the company will still struggle even with a hot-selling Touchpad.

Losing Money: According to an iSuppli teardown, the 16GB Touchpad cost to build $306.65 while the 32GB version cost $328.65. This means if the 16GB version sells for $99, HP is losing more than $200 on every Touchpad sold. There is a reason the tablet had such a high price.

Still A Mess: Here's a quote from Kevin Hunt, an analyst with Auriga who actually his rating on HP after the Touchpad sale, about the company. It perfectly describes the reality of their situation. "We would not take this as an opinion that HP is a great company, or that we have any faith in the current management team. We don't think either of those is the case. HP is still a mess." Exactly. Hunt is essentially saying a bargain buy is a bargain for a reason.

Competitors: All HP's Touchpad sale has done is open the eyes of every non-iPad tablet competitor out there and given them an unmistakable message: cheap is better. As soon as other tablet manufacturers, particularly Amazon and those which use the Android OS, come out with a $100 tablet, HP's becomes irrelevant (especially since it will never get the update treatment).

Follow Gabriel Perna on Twitter at @GabrielSPerna

About International Business Times

The International Business Times is composed of twelve high-growth online editions (ibtimes.com) that give readers local reports balanced with multinational perspectives. Exclusive and transparent insights from global markets make The International Business Times an indispensable news source for business-minded individuals.

Related Stocks:
Stock Market XML and JSON Data API provided by FinancialContent Services, Inc.
Nasdaq quotes delayed at least 15 minutes, all others at least 20 minutes.
Markets are closed on certain holidays. Stock Market Holiday List
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.
Press Release Service provided by PRConnect.
Stock quotes supplied by Six Financial
Postage Rates Bots go here