[TomOfTTB]

I've seen this written by a couple of different people over the weekend and it terrifies me every time. It's as if the author is completely divorced from reality.

As if "just price it lower" is some kind of poignant observation that no one thought of. As if it were easy to compete on price when Apple is buying parts in quantities you couldn't hope to match.

I'm always critical of people who make the argument that "free is the right price" for services but at least that is somewhat valid. Suggesting companies like Samsung target "$200 or less" is just crazy.

[Duff]

Ultimately, price drives decisions. My neighbor doesn't understand why he can't sell his house. The reason is simple -- he's asking 25% more than the market price without giving people a compelling reason to spend the money.

The Touchpad is telling you something about the iPad market (there is no such thing as a "tablet" market). People are willing to line up to spend $500 on an iPad. But they are also willing to spend $99 on a tablet that does/will do less than an iPad.

So, you need to: - Take massive losses on hardware (Microsoft, for example, could afford to do this) - Build something that takes advantage of advantages that you have over Apple. (ie. Apple doesn't get enterprise at all) - Come up with some other value proposition (integrate with my car, use as interactive visual display, etc)

[jerf]

That last one is why Amazon is the one to watch. They have a plausible "sell the Kindle-pad at a moderate loss" scenario, in that they have numerous for-pay services they can hawk from a privileged position on their tablet, and with Amazon Prime's integration with their video service, a plausible way to turn a Kindle-pad into a recurring revenue stream as well, a recurring revenue stream that encourages additional one-time purchases of media content.

Contrast this with Google, where I don't think even "lots of ads" is enough of a per-customer-value proposition to enable them to take a couple hundred off a tablet's price very easily.

[cube13]

I honestly don't think that Amazon or Barnes and Noble consider their devices to be iPad competitors, though. They're selling them as eReaders that just happen to be able to play Angry Birds, not as full-featured tablets.

[jerf]

That's what they are selling them as... now.

Have you seen this? http://www.amazon.com/b/ref=sa_menu_aiv_piv_t10?ie=UTF8&... Or anything else on the left sidebar under "Instant Video". Or their music plays. Or http://www.amazon.com/mobile-apps/b?ie=UTF8&node=2350149... .

There's a lot of things they've been doing over the past year or two that makes a lot of sense in the context of planning to create a blessed Amazon media player. It does not exist yet, but it's hard to imagine it won't.

[wvenable]

I think there's room in the market for an inexpensive web-only tablet. Before the Chromebook's came out, I had assumed that was what Chrome OS was for -- a real stripped down inexpensive tablet with almost no local flash, a small amount of RAM, etc. Most tablets right now are attempting to match the iPad in every way: capability, size, weight, etc. So, of course, they're in the same price range.

[roc]

People are trying to match the iPad because even a stripped-down tablet is still going to have to cost ~$400. The extra RAM and Flash add what to the bill-of-materials? $25?

If you could put together a $200 tablet, Negroponte would be declaring victory in the press, rather than quietly rolling back the date of the XO-3 over and over again.

[sciurus]

Archos is selling their 10" tablet for $270. The 7" is $240. I've used one of the 10" models and found it fine for web browsing. Sadly, their new models coming out in September are said to cost $300 and $370.

https://store.archos.com/archos-internet-tablet-p-5005.html

[roc]

Are they clearing inventory at the lower price, or were they ~$300 the whole time?

[sciurus]

Looking back, I think the original price was $299. I hadn't realized it earlier, but Archos also has a low-end series that runs from $99 to $199. I doubt the hardware is very good in that price range.

http://arnovatech.com/home.html?country=us&lang=en

[nradov]

Not crazy at all. The rule in hardware is price it to sell, regardless of profit margins or lack thereof. Then — if you get sales traction — figure out how to drive your costs down through economies of scale, substitution of cheaper components, design simplification, etc.

[MatthewPhillips]

You have to have very deep pockets, and the ability to pacify your shareholders, to absorb these types of losses. I think people are really underestimating how much HP has lost here.

[nkassis]

Microsoft did it back in the day with the Xbox but I don't think it's a good strategy to use against a 70b in cash company who can match your prices to kill you. With that said if you did drive down the price for everyone Apple would be in trouble (so would everyone else but less due to their diversification). Imagine if we expect 300 tablets. That would be hard for a Apple to keep going on for a while, they managed to keep high prices with laptops and desktops but not on the scale of the iPad/iPhone etc.

[tomjen3]

Thing is, Apple has a lot of money now but MS can run deficits in the tablet business essentially forever. So can Google.

Half of Apples income is tablets. They can run for some time, but not forever.

[anigbrowl]

I think people imagine it's like safety razors - sell the razor cheap, make money on the blades. The same strategy has worked for printers, where the real money is in ink or toner cartridges, and with phones, where the profit is in selling connection time/bandwidth over a 2 year contract. After all, Apple takes a cut of all sales through the app store and iTunes store, so some tech writers assume that that will work for anyone (even though it's taken Apple the best part of a decade to build the required infrastructure and the company had positioned its products at the top of the market almost since inception).