Memo to Hewlett-Packard

Ever wake up in the morning, roused from a pleasant slumber by the grating buzz of an alarm clock's incessant nagging? Ever respond to the annoyance not by waking up, but by instead slapping the "snooze" button ... repeatedly?

If so, then congratulations: There may be a job waiting for you at Hewlett-Packard (NYSE: HPQ  ) .

Sleeping toward Armageddon
As you may recall, HP made some headlines last month when in one swell foop it decided to:

  • Withdraw from the tablet-computer wars and allow Apple (Nasdaq: AAPL  ) and Google (Nasdaq: GOOG  ) to slug it out on their own.
  • Pass on the opportunity to flank a vulnerable Research In Motion (Nasdaq: RIMM  ) and Nokia (NYSE: NOK  ) on smartphones, and abandon that market as well -- after having only just bought into it.
  • And, most astounding of all, get out of the PC biz entirely, spin off its computer division, and basically hand the market over to Dell (Nasaq: DELL) and Lenovo wholesale.

Beep! Beep! Beep!
Incidental to all these moves, HP also held a midnight fire sale of its remaining TouchPad tablet PCs. The idea was simply to clear out now-stale inventory, but in pricing its computers as low as $99, HP inadvertently ignited a firestorm of consumer interest. By some accounts, the company sold 350,000 TouchPads in a single day. Considering that this was more TouchPads than HP actually had built, however, the company then had to restart the production line to fulfill the unanticipated demand.

Now, you might think this incredible response would have awakened some interest at HP. Instead, though, HP hit ...

Snooze
And slept right through it. A few weeks back, I received my own personal note from the company, confirming that it was building TouchPads just as fast as its foremen could crack their whips and force the HP elves to work. It would take "6-8 weeks" to get me my TouchPads (yes, I bought in bulk), but get them to me they would. However, aside from an ambiguous wish welcoming me to "the exciting community of webOS," HP gave no indication that after fulfilling its unprecedented demand for TouchPads, the company intended to keep building more.

Perhaps HP figured the demand for its product was temporary only. A one-day phenomenon, impressive but finite. Yet …

Beep! Beep! Beep!
Just yesterday, the alarm went off again. In a posting on slickdeals.net, the site that originally broke the "$99 TouchPad" story, one TouchPad fan announced the discovery of a "great deal on a touchpad that you can not find anywhere." Apparently, Office Depot (NYSE: ODP  ) had stumbled across a small cache of the machines and was offering them for $150 a pop -- this being the bigger, 32 GB version of the tablet.

Within just a few hours, some 235 people chimed in with posts describing (at first) their successful purchases, then cries of distress at being unable to access the site or snag a comp, and finally a one-word epitaph to this latest round of TouchPad-buying. The deal was now officially "Dead." Sold out. Cleaned out. Every single machine available, claimed for the asking price.

Snooze?
Judging from its past actions, I won't be surprised if HP is forced to enter upon another round of TouchPad-building to satisfy demand from its distributor. The real question, though, is whether having the alarm go off twice in as many months will suffice to wake HP from its slumber.

I mean, clearly there's demand for this product -- at least at the right price point. Whether that's $99, or $150, or the $200-and-up "flipped" TouchPads are said to be fetching on eBay, I don't know. But the demand is there. (As, too, is the potential to profit from it.) But what's really interesting here are two other things. I call these things, with apologies to Dr. Seuss:

Thing 1 ...
First, when HP sold 350,000 TouchPads in 24 hours, this spoke volumes about consumers' faith in the HP brand and their desire to buy HP products. Say what you will about HP's quality -- and you don't have to look far to find negative reviews on the Web these days -- the fact that TouchPads sold so quickly is proof that a lot of folks still like HP quite a bit. Selling the PC division because its margins aren't quite as fat as Leo Apotheker thinks he can get from slinging software seems to me an incredible waste of that goodwill.

... and Thing 2
The other takeaway here is that this goodwill extends even to the TouchPad. Think about it, Fools. When 350,000 consumers lined up to buy the TouchPad sight unseen, that was a leap of faith. People were buying the tablet because they believed HP probably made a decent computer. Now, several weeks later, a lot of these buyers have already received their TouchPads, had a chance to try them out, and show them to their friends. And guess what? They still want them.

Memo to HP: The demand is there. People are ready, willing, and eager to buy your product. If you ignore us, though, kill the TouchPad, and sell your PC division, you have only yourself to blame.

Fool contributor Rich Smith owns shares of Google. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 356 out of more than 180,000 members.

The Motley Fool owns shares of Research In Motion, Apple, and Google. Motley Fool newsletter services have recommended buying shares of Dell, Google, and Apple and creating a bull call spread position in Apple.

We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (4) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 21, 2011, at 9:57 PM, daveshouston wrote:

    The only message here is that bargain hunters will opt for an item with a price tag that reads "75% Off" no matter the inherent value.

  • Report this Comment On September 22, 2011, at 12:10 AM, vf5mzap wrote:

    Rich, good article. I totally agree with the different things that you mentioned here. The toucpad is a decent tablet and it almost seems that hp needs to have a train run over them before they realize that their is demand for the touchpad. Yes the huge price drop makes a diffference but eveyone that bought one or still wants to buy one would not have paid the 99.00 or 149.00 dollars if they did not think it was a good tablet. Hopefully hp will listen because it would be a shame to see a tablet with a good os such as webos go to waste. As far as i am concerned webos is as good or better than apples or androids.

  • Report this Comment On September 22, 2011, at 12:24 AM, lucasmonger wrote:

    I just don't get HP. If they're taking a loss at $99, why would any business with any brains at all make more, to make it up in volume? For a second, I thought that HP might have done the $99 fire sale to drum up business, and if the consumer base bought it like crazy, they could say "never mind" and start selling them in earnest again.

    Alas I agree they seem to be asleep at the wheel.

    Wonder what would happen to iPad sales if apple even had a 20% discount.

  • Report this Comment On September 26, 2011, at 1:17 PM, TMFDitty wrote:

    @lucasmonger: The answer is "razor and blades." You sell at a loss, then make it up not on volume, but on add-ons. Amazon, for example, sells its Kindle at a loss in order to facilitate sales of e-books.

    TMFDitty

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