What Does the TouchPad Fire Sale Tell Us? Not Much.

on August 22, 2011

Way too much is being made of the success of Hewlett-Packard’s fire sale of TouchPad tablet, essentially the liquidation of a lot of distressed inventory.For example, this The Next Web article speculates on what TouchPad sales might mean for Amazon’s still completely notional tablet.

First, let’s put the TouchPad “frenzy” in some perspective. HP, directly and through channel partners, probably moved somewhere between 300,000 and 500,000 units. By past TouchPad standards that was fabulous. But Apple is likely selling close to a million iPads a week, at full price, every week.

Second, it’s pretty easy to get people to buy a product with a $300 bill of materials (iSuppli’s estimate for the TouchPad) for $99, even a dying product. Folks just can’t resist a deep-discount bargain. The problem is there’s no business model that will sustain it for much more than a weekend. Only wireless phone operators, with lucrative two-year contracts, can afford to offer that much subsidy. Amazon might be able to subsidize a tablet, but by nowhere near that much unless it was very, very selective about who got one.

There are lots of retail liquidators around who know how to move distressed goods of much more dubious value than a TouchPad. All you need is a channel and a low enough price. We shouldn’t read a lot of meaning into this.