HP eats $100 million charge to cover unsold stockpile of TouchPads

Posted:
in General Discussion edited January 2014
HP announced on Thursday that it will take a roughly $100 million charge due to poor sell through of the TouchPad, likely in order to credit Best Buy and other resellers for their unsold inventory.



The company revealed during its quarterly earnings call that it took a $.05 charge per share for the TouchPad, which, given the company's 2.07 billion outstanding shares, amounts to just over $100 million.



The news came amid a bevy of changes announced by HP, including the cancellation of webOS, the potential spinning off of its PC business and the $10 billion purchase of software giant Autonomy Corporation.



Assuming a $400 write-off on each TouchPad unit, the charge would cover close to 260,000 unsold tablets, in line with a recent tip suggesting Best Buy was returning more than 240,000 TouchPads after selling just 25,000. Of course, HP may have taken a smaller write-off per unit, especially given the wide range of distribution outlets where the device was sold.



Resellers would either return the devices to HP for a credit, or could use subsidies from the company to sell stock at fire-sale prices.



Though analysts had expected TouchPad sales to disappoint, HP's decision to kill off the webOS platform on mobile devices surprised Wall Street. The company's decision focus on enterprise software is evidenced in its purchase of Autonomy Corporation and the fact that it is investigating "strategic options" for spinning off or selling its low-margin PC business.







HP CEO Léo Apotheker said Thursday the transition comes after careful consideration about ""what needs to be fixed, what needs to be shut down, and what needs to be separated," admitting that "the tablet effect is real and sales of the TouchPad are not meeting [HP's] expectations."



Year-over-year revenue growth for HP was just 1.5 percent in the most recent quarter. The company's total revenue was $31.2 billion, or $1.10 in earnings per share.







Shares of HP stock closed the day at $29.51, down almost 6 percent, and continued to slide in after-hours trading.



Despite being the world's largest PC maker, HP has struggled to grow profits for its PC hardware unit. The company posted $9.6 billion in revenues and just $569 million in profits for its PC business last quarter.







With operating margins of just 10.46 percent, HP has had a difficult time competing against Apple, which maintains a 30.43 percent operating margin. According to one analysis from June, Apple makes more profit from selling one Mac than HP does from selling 7 PCs.



The TouchPad tablet arrived in July to unenthusiastic reviews. Just one month later, HP slashed its price by $100 after failing to gain traction. However, one analyst has suggested that the discount may have backfired because customers are expecting even further price drops.



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Comments

  • Reply 1 of 79
    sheffsheff Posts: 1,407member
    I'm thinking of buying one. You guys think it will sell for a lot in a few years? As a collector item I mean.
  • Reply 2 of 79
    solipsismsolipsism Posts: 25,726member
    I thought HP had a chance to bring some real competition to Apple. Oh well.
  • Reply 3 of 79
    alfiejralfiejr Posts: 1,524member
    it can be accurately said that "the iPad 2 killed the TouchPad." the TouchPad was obviously designed to match the original iPad's hardware. but even Samsung had enough sense to delay the Galaxy for several months once they saw the lighter and thinner iPad 2, so they could come up with something close to it (a little too close, apparently).



    but i think HP did the smart thing today. trying to jump into the next gen portable market was a huge blunder by Mark Hurd. it was already too late. iOS and then Android were too well established and Palm OS - as nice as it is - just didn't bring anything really new to the table to leapfrog them. and unlike the other cell phone OEM's, HP didn't have a well established global telco distribution network ready either. nor was/is Apple standing still, as iOS 5 and iCloud will put further distance between the iPad and all the rest.



    so HP was smart to bite the bullet and shut it all down, instead of throwing good money after bad.



    and WebOS still has real value, probably a lot more than HP paid to buy Palm. thanks especially to Google's panic shopping purchase of Motorola. all the other Android OEM's will now immediately assess the potential to license, or even buy, WebOS so they will no longer have Google as the master of their fate.



    so all you WebOS fans, do not despair. you will probably see WebOS again next year running on new smartphones, and maybe tablets, from ... ???
  • Reply 4 of 79
    galbigalbi Posts: 968member
    Samsung could step in and purchase webOS and make it its own mobile OS.
  • Reply 5 of 79
    apple ][apple ][ Posts: 8,680member
    Quote:
    Originally Posted by sheff View Post


    I'm thinking of buying one. You guys think it will sell for a lot in a few years? As a collector item I mean.



    You're joking right? I wouldn't buy one of these tablets if they were blowing them out for $99.99. In the end, that would still end up being a waste of hundred dollars. I don't know about you, but I could easily come up with a whole list of things that I'd rather spend a hundred dollars on.



    I also thought that a "collector's item" usually means that the item would have to qualify as being collectible. As a matter of fact, these TouchPads are so collectible that there are currently hundreds of thousands of them collecting dust in various warehouses with panicky people wondering how they're going to get rid of them.



    Then again, there are people who do collect all sorts of junk, so who am I to say? This tablet isn't worth anything, not today, and certainly not in a few years from now.



    edit - just noticed your sarcasm.....I have a good excuse for missing it though.........
  • Reply 6 of 79
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by Galbi View Post


    Samsung could step in and purchase webOS and make it its own mobile OS.



    They have Bada, which already looks promising.
  • Reply 7 of 79
    galbigalbi Posts: 968member
    Quote:
    Originally Posted by solipsism View Post


    They have Bada, which already looks promising.



    Well yes. But they could bolster the engineering team with what webOS has.



    Lets face it, webOS by itself, is a fantastic mobile OS.





    Another potential suitor could be Amazon.



    Yes, the internet retail store.



    They could help make a new Kindle OS.



    Amazon has the distribution power, the app environment setup would be a breeze, they have the cloud services going pretty well, also on top of that the retail business too.
  • Reply 8 of 79
    ash471ash471 Posts: 705member
    I was hoping HP would survive, but I suspected they would get squeezed from the top by apple and the bottom by Google. HP had the most potential to compete with Apple but nowhere to go. I hope for their sake they get their money out of WebOs. Maybe RIM will buy it. RIM seems to be into doing really dumb things. The only smart company that might buy it is Samsung.
  • Reply 9 of 79
    Quote:
    Originally Posted by Galbi View Post


    Samsung could step in and purchase webOS and make it its own mobile OS.



    Why pay? They could just rip it off for free
  • Reply 10 of 79
    ash471ash471 Posts: 705member
    Actually, if Google were smart they would buy WebOs at a fire sale price and help their partners transition to WebOS and drop Android and all its woes. That would be a really interesting event.
  • Reply 11 of 79
    How about those Turkish schools that want to buy tablets? Donate them for cryin' out loud.
  • Reply 12 of 79
    Quote:
    Originally Posted by Galbi View Post


    Samsung could step in and purchase webOS and make it its own mobile OS.



    What about HTC, LG or Acer?
  • Reply 13 of 79
    nvidia2008nvidia2008 Posts: 9,262member
    Quote:
    Originally Posted by sheff View Post


    I'm thinking of buying one. You guys think it will sell for a lot in a few years? As a collector item I mean.



    Wow, I really don't think so. You're better off investing in gold right now.



    Edit: Not sure if you were sarcastic.
  • Reply 14 of 79
    nvidia2008nvidia2008 Posts: 9,262member
    I'm not sure why you all are still so positive about WebOS. Even *if* it is as fantastic as many people still believe, it seems to be a poisoned chalice.



    Quote:
    Originally Posted by ash471 View Post


    Actually, if Google were smart they would buy WebOs at a fire sale price and help their partners transition to WebOS and drop Android and all its woes. That would be a really interesting event.



    Quote:
    Originally Posted by ash471 View Post


    I was hoping HP would survive, but I suspected they would get squeezed from the top by apple and the bottom by Google. HP had the most potential to compete with Apple but nowhere to go. I hope for their sake they get their money out of WebOs. Maybe RIM will buy it. RIM seems to be into doing really dumb things. The only smart company that might buy it is Samsung.



    Quote:
    Originally Posted by Galbi View Post


    Well yes. But they could bolster the engineering team with what webOS has.



    Lets face it, webOS by itself, is a fantastic mobile OS.





    Another potential suitor could be Amazon.



    Yes, the internet retail store.



    They could help make a new Kindle OS.



    Amazon has the distribution power, the app environment setup would be a breeze, they have the cloud services going pretty well, also on top of that the retail business too.



    Quote:
    Originally Posted by Galbi View Post


    Samsung could step in and purchase webOS and make it its own mobile OS.



  • Reply 15 of 79
    bdkennedy1bdkennedy1 Posts: 1,459member
    The people that made them the number 1 PC maker got sick of the crappy quality.
  • Reply 16 of 79
    kibitzerkibitzer Posts: 1,113member
    Walked into my local Costco this afternoon, past the big display of HP TouchPads in blister packs near the front door. It was a very full display of actual units, not the cardboard pictures you exchange at the checkout for the real thing. I guess Costco isn't much worried that someone will steal these suckers. Wonder how long it'll take them to move the HP display out of the way to make room for more of the Samsung Galaxy, Motorola Xoom, Toshiba Thrive and cheap Vizio tablets no one is buying either.
  • Reply 17 of 79
    orlandoorlando Posts: 601member
    Quote:
    Originally Posted by island hermit View Post


    What about HTC, LG or Acer?



    If both Palm and HP could not make WebOS a success what makes you think HTC, LG or Acer would do any better?



    As a smartphone OS it is dead. Even if someone made another WebOS phone/tablet would people buy it and would developers make apps?
  • Reply 18 of 79
    nagrommenagromme Posts: 2,834member
    I say, dump those tablets on the market for near-free, and let some wacky/cool hobby platform spring up via hacking the things for years to come!
  • Reply 19 of 79
    HP does make some pcs that are equal to apples. Their z series workstations are pretty much mac pros. Even down to price. If they bring that quality to the rest of their pc's they can ramp up the profit.



    I hope they dont sell their pc business.
  • Reply 20 of 79
    quinneyquinney Posts: 2,525member
    I think HP should collect them all and try to sell them in the Phillippines. They already have that Manny Pacquiao commercial that is pretty good and he is enormously popular there.
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