toddfearn.com

Let’s analyze the space for a moment.  Apple has sold over 25 million iPads, has over 90,000 iPad apps and another 300,000 iPhone apps that will run on the iPad.  They invented this market and totally dominate it at this time.

HP today introduced its competitor, the TouchPad, at the same price as the iPad ($499) with roughly 300 apps in the store. 

So I’m a consumer walking into Best Buy, which also sells iPads.  Why would I buy a TouchPad? 

So what should HP do?  I say HP needs to do something radical, like give it away for free.

HP spent $1.2 billion just to acquire WebOS.  They probably spent another billion or more on product development and marketing so far.  So why not give away the hardware to gain significant market share?  Let’s say up to $4 billion worth of hardware.

If you think $4 billion is a lot of money for HP, think again.   HP has over $12 billion in cash on hand.  And over the last year, HP has lost over $50 billion in market capitalization.  During that same period, the iPad has added nearly $100 billion in market capitalization to Apple.

If we do the math, and I’m guessing on the high side of what it costs HP to produce a TouchPad, they can give away 10 million TouchPads for $4 billion.   Let’s say the cost is significant at $400 per device.  $400 x 10 million = $4 billion.

And if HP can give away 10 million TouchPads by the end of the year, and it is predicted that Apple will sell another 20 million by the end of year giving them a total of 45 million iPads, this gives HP a 22% market share (10 million TouchPads/ 45 million iPads).  I’m ignoring other competitors at the moment because they are essentially insignificant at this time.

So within 6 months, HP becomes a major player in the space.  Developers have no choice but to take a hard look at producing apps for the platform and HP in turn gains more market share.

The tablet market is key for HP according to analysts.  “The TouchPad has to succeed for HP to get its mojo back,” said Peter Goldmacher, an analyst at Cowen & Co.  “If they can’t do it in on e of the potentially highest growth markets, it will cast doubt on their ability to do it at all”.

And what if they don’t give it away?  Let’s say they get lucky and sell 1 million units by the end of the year. 1 million TouchPads divided by 45 million iPads (1,000,000 / 45,000,000) = 2% market share.  With 2%, no one really cares that much and I think this 2% happens if they’re lucky.

HP needs a radical strategy to fight this battle.