[martingordon]

The key factor everyone's missing from a loss leader strategy is that the consumables must be a requirement to use the device. Consoles, razors and printers can all sell for a loss because they are worthless without games, blades and ink. You can get by on a tablet (and I bet a majority of non-tech savvy users do) by just using the built-in apps and/or free apps.

If HP went with this strategy with the TouchPad, it would require that a user spend $1000 on apps to make up for the $300 loss on each TouchPad. At an extremely generous $5/app, that's still 200 apps per user. And what happens when the TouchPad 2 comes out? Does HP sell it at a loss, necessitating yet another $1000 to be spent on apps, or do they bump the price up and deal with the negative press?

The best thing HP could have tried would have been to negotiate better component pricing from its suppliers. The problem here would have been that they have no leverage, despite being the world's largest PC manufacturer, since their traditional PC components consist of hard drives and Intel chips, neither of which have any place in the mobile market.