But striving to be #2 isn't much of a motivator -- Like saying you want to win the Olympic Silver Medal!
...Or even worse -- we want to be in second place in the World Series.
It would have been better had he said something like:
1) We intend to be a long-term player in this market.
2) Our introductery TouchPad establishes HP as an entrant
3) We have additional products in development to help us attain the #2 position by Year End 20xx.
4) Then... Who can say? Give me a place to stand, and I can...
...Kisses for everyone
P.S. XOM called -- they want 1st place back!
Oops... Trading of XOM has been halted -- last I looked it was up 2.5% while AAPL is up 1.4%
For YEARS the mantra of every Apple fanboy was that "market share doesn't matter", e.g. being in first or 5th place (which Apple was for a long time) is irrelevant. So how is it that we now are knocking HP for the audacity of thinking that second place is good enough, for now?
Mr DiFranco sounds like a realist. So refreshing from bombastic Ballmer!
I appreciate that he seem to give Apple the respect and credit it has earned.
However, how can his company make any coin. I believe when you hawk your jewels at Walmart or BestBuy, you get back only half the returns of your own market price? If so, cost to make isn't covered and loss not profit becomes your gain.
Oops! Forgot I'd posted much the same before. Still stymied, though glad to complement SD.
Last time I checked, Apple was 'hawking their jewels' at BOTH Best Buy and Walmart.
Sure, if you are making money at it, who cares if you're #2 or #X.
The problem with HP - which you seem to be ignoring - is whether and how they can make money at it with the price cut. Losing money and being #2 is not a good place to be is the the general drift of this thread, if you get the drift.....
Let's be clear - the assertion that HP is losing money at this price point is an assumption. However, probably not a valid one. Most of the manufacturing cost estimates I have seen put it around $300 to build so at $400 you are still talking a 20% margin. That's not as good as Apple, but it isn't 'going broke' either.
For YEARS the mantra of every Apple fanboy was that "market share doesn't matter", e.g. being in first or 5th place (which Apple was for a long time) is irrelevant. So how is it that we now are knocking HP for the audacity of thinking that second place is good enough, for now?
Pay attention! Marketsahre in lieu of profits doesn't matter. Just look at how that has worked out for Acer. Look at where Dell is heading. Now look at Apple's profit in every area of business compared to the competition.
Let's be clear - the assertion that HP is losing money at this price point is an assumption. However, probably not a valid one. Most of the manufacturing cost estimates I have seen put it around $300 to build so at $400 you are still talking a 20% margin. That's not as good as Apple, but it isn't 'going broke' either.
You need to understand the difference between gross margin and operating margin.
Let's be clear - the assertion that HP is losing money at this price point is an assumption. However, probably not a valid one. Most of the manufacturing cost estimates I have seen put it around $300 to build so at $400 you are still talking a 20% margin. That's not as good as Apple, but it isn't 'going broke' either.
iSuppli priced the iPad-2 at $326, just for materials, add a small amount for labour, maybe some more for patent royalties and you're up to say $350 cost per unit.
That would put the HPs gross margins much lower than 20%. Then once you added in the costs of marketing, R&D, advertising etc. there's no real doubt that the business is operating at a loss.
Some good points. HP, however, has two other advantages that should not be underrated. First, it has a huge patent portfolio. HP isn't going to get squeezed like Google's hardware manufactures. Eventually there will be a day of reckoning for Android manufacturers. Some might even prefer licensing WebOS from HP, as HP has said it is open to the possibility. Apple will not sue HP as the companies respect each other (HP even sold an HP branded iPod at one point).
Second, HP can take an Apple approach like when Apple released OSX for the first time. It can preinstall WebOS on dual boot computers while having a familiar OS like Windows as the default. That is a huge customer base. This will allow customers to play with the OS and become accustomed to it. Unlike Microsoft, HP can afford a slow start with WebOS.
I see HP as the strongest challenger to Apple if HP can hold it together and play its cards right. With that said, I played with the HP Tablet. Currently, it isn't worth the money even with the discount compared to the iPad.
Very interesting. I think you're right, HP could be the strongest competitor.
Well QNX is actually pretty Good. Sure playbook tanked, but so did android and everyone else. I think QNX is equal to webOS on tablets. Of course RIM "borrowed" some design elements from webOS, but overall both are innovative in terms of gestures and are fairly intuitive.
If RIM pushes QNX on phones as well and gear them in a laser focus on enterprise only they will keep their niche and will be very successful.
HP has to succeed in the consumer market (at least touchpad was aimed at consumer market). In this segment we have techies, gamers, old people, music / video / photo geeks, facebookers and students. Apple has all of those categories in the bag.
Google made an appeal to techies and low end which made it successful. I'm not sure what HP has. Maybe printing enthusiasts.
I don't disagree that QNX could be a good product. The problem with RIM is that phones and tablets and laptops are converging with regard to their software and hardware. RIM already exploited there niche (push email) and their niche is evaporating quickly. RIM has no distribution channels outside of phones and no real ties to anyone else that does. They have no experience making PCs and they are laying people off. They don't have a chance. The only question is how much cash they will produce before they die and how much will their assets be worth in an acquisition or sale.
Pay attention! Marketsahre in lieu of profits doesn't matter. Just look at how that has worked out for Acer. Look at where Dell is heading. Now look at Apple's profit in every area of business compared to the competition.
I understand that, but I think the comments here have, in general, greatly distorted the facts. Lets look at your statements above, for instance. You are comparing Apple with Dell, and then asserting that this is foreshadowing for HP. But what you should be doing is comparing HP to Dell and Acer, not comparing Acer / Dell to Apple and trying to map your argument to HP.
To be clear, Apple has recently been bouncing back and forth between being the first or second most valuable company ON EARTH. Apple enjoys incredible margins that are not the norm in the industry as a whole. To look at Apple and suggest that every company unable to measure up to their margins must somehow inevitably be doomed to failure is, I think, a gross exaggeration.
Hey, nice analysis. There are points I agree with as well as those that I don't, but still, nice analysis.
On the other hand, saying RIM is dead and their only options are to go belly up or being sold is very premature I think. Unless I'm wrong (if I am, then your scenario is probably close to being true), although their business is going downwards and they may be bleeding money right now, they still have, last I heard, a huge supply of $$$ from when they were making a killing. So assuming they make the right moves, they could get out of their trail spin to survive.
Very true that RIM has plenty of cash on hand. However, they don't have the ability to spend it in a way that will give them an advantage in the market (Maybe they could partner with someone????). Cash is important, but it can't solve everything. Warren Buffet has more cash than RIM, but no one thinks he could win the mobile computing war. If a company doesn't have the right people, the right skills, and the right connections, they won't succeed. RIM's business has so many things going wrong for it I think it is a safe bet to say they will lose this war. It has nothing to do with my like or dislike of Blackberry products. It is an analysis of the market and their business. The next question is what will their assets be worth? That's hard to say because for now the machine is still printing money. I don't own any Blackberry stock because I can't figure out what its value is assuming they lose the war.
iSuppli priced the iPad-2 at $326, just for materials, add a small amount for labour, maybe some more for patent royalties and you're up to say $350 cost per unit.
That would put the HPs gross margins much lower than 20%. Then once you added in the costs of marketing, R&D, advertising etc. there's no real doubt that the business is operating at a loss.
I've seen many such comparisons, with a low around $300 and a high around $330. But it is important to note that these are estimates, and these third party organizations simply don't know what HP's cost per unit is; it is speculative. However, it is very obvious from even these figures that HP is likely not selling each touchpad at a loss, as some here have asserted. And, even given the distinction between gross and operating margin, as someone here pointed out, it is not at all clear that this is a money losing move for HP. I'd like to note that you selected one of the higher cost estimates, and then you added some fictional royalties and other assumptions, plus unspecified gross operating costs... in order to reach your figure. In other words, it is purely conjecture on your part.
Bottom line is this: people here adore Apple (and so do I), but this colors commentary to the extent that it is often impossible to find a single commenter who is able to approach issues rationally and objectively. My view is that the doom and gloom prognostications in this thread are exactly that: lacking in objectivity.
HP is making aggressive moves to try and solidify a contender's position in the market, and I think they have that capacity to do so. Their price cut is part of that strategy; it does not spell the end for HP after having just gotten started, and thinking it does is just immature poppycock.
I understand that, but I think the comments here have, in general, greatly distorted the facts. Lets look at your statements above, for instance. You are comparing Apple with Dell, and then asserting that this is foreshadowing for HP. But what you should be doing is comparing HP to Dell and Acer, not comparing Acer / Dell to Apple and trying to map your argument to HP.
To be clear, Apple has recently been bouncing back and forth between being the first or second most valuable company ON EARTH. Apple enjoys incredible margins that are not the norm in the industry as a whole. To look at Apple and suggest that every company unable to measure up to their margins must somehow inevitably be doomed to failure is, I think, a gross exaggeration.
1) I never stated, suggested or eluded to HP in my comment. It was a comment that stands alone in the thread and goes directly toward your comment about marketshare and Apple.
2) To be clear, "Apple has recently been bouncing back and force between being the first or second most valuable [publicly traded] company ON EARTH." We don't have to state it when talking casual, just like we don't have to state "in lieu of profits" when making a casual comment about Apple's business focus.
I've seen many such comparisons, with a low around $300 and a high around $330. But it is important to note that these are estimates, and these third party organizations simply don't know what HP's cost per unit is; it is speculative. However, it is very obvious from even these figures that HP is likely not selling each touchpad at a loss, as some here have asserted. And, even given the distinction between gross and operating margin, as someone here pointed out, it is not at all clear that this is a money losing move for HP.
Bottom line is this: people here adore Apple (and so do I), but this colors commentary to the extent that it is often impossible to find a single commenter who is able to approach issues rationally and objectively. My view is that the doom and gloom prognostications in this thread are exactly that: lacking in objectivity.
HP is making aggressive moves to try and solidify a contender's position in the market, and I think they have that capacity to do so. Their price cut is part of that strategy; it does not spell the end for HP after having just gotten started, and thinking it does is just immature poppycock.
I think Cloudgazer makes a solid argument that HP could be selling TouchPads at a loss. Nothing wrong with that if you have a solid endgame. Only poor chess players never sacrifice the queen.
What HP needs is enough users to create an ecosystem that devs want to build for. And users want to buy into a decent ecosystem. IT's a Catch-22 unless you shift a factor significantly. One way is to pay devs and another to essentially pay users by reducing the price of your product to the point it's a must have.
With the next revision hopefully they'll have enough users and devs to have a solid tablet ecosystem and can start making some real coin off their investment. Maybe by then they'll have the revision 1 bugs worked out and have a solid smartphone platform to market as well. There is a lot of room for other players in these reborn markets.
Bottom line is this: people here adore Apple (and so do I), but this colors commentary to the extent that it is often impossible to find a single commenter who is able to approach issues rationally and objectively. My view is that the doom and gloom prognostications in this thread are exactly that: lacking in objectivity.
Objectivity is fine, objectivity is great, let's try some shall we? Apple's average gross margin is around 40%, yet their operating profit is far lower. Once you've taken out all the fixed costs they're down to more like 25%. So around 15% is used for the fixed costs.
Even based on your estimate that HP has 20% Gross margins that would mean that their net margins would be around 5%, and that's assuming that the fixed costs only reduce margins by 15%. In fact we have every reason to assume that fixed costs reduce profits for the touchpad by far more, because the cost of developing/marketing/etc the touchpad is not 1/10th the cost of developing the iPad but it does sell 1/10th the units (or worse).
If you believe that HP is making money on the touchpad business and you wish to claim that this is a rational objective belief then you're going to have to produce some evidence.
Comments
The problem with HP - . . . - is whether and how they can make money at it with the price cut. . .
Yup, confusion abounds
So, does Apple own this corner of the tech market as it does the media market with the iPod family? Or must we wait another year to crown the Emperor.
And are the iPad / MBA sisters the slam dunk that will ring the death toll to the dinosaur called MicroSoft and its ageing siblings?
(I really only wanted to ring in my 60th post today.) Nobody really reads this far down in posts unless they are posting late, too.
Holly crap anantksundaram. Posts: 6,709!
... And then they can say...
... Wait for it...
"there's an ass for that!"
lolololololol
Yup, confusion abounds
So, does Apple own this corner of the tech market as it does the media market with the iPod family? Or must we wait another year to crown the Emperor.
And are the iPad / MBA sisters the slam dunk that will ring the death toll to the dinosaur called MicroSoft and its ageing siblings?
(I really only wanted to ring in my 60th post today.) Nobody really reads this far down in posts unless they are posting late, too.
Holly crap anantksundaram. Posts: 6,709!
...How long do I have to wait -- can I get you* now... or must I hesitate?
* market dominance
I agree!
But striving to be #2 isn't much of a motivator -- Like saying you want to win the Olympic Silver Medal!
...Or even worse -- we want to be in second place in the World Series.
It would have been better had he said something like:
1) We intend to be a long-term player in this market.
2) Our introductery TouchPad establishes HP as an entrant
3) We have additional products in development to help us attain the #2 position by Year End 20xx.
4) Then... Who can say? Give me a place to stand, and I can...
...Kisses for everyone
P.S. XOM called -- they want 1st place back!
Oops... Trading of XOM has been halted -- last I looked it was up 2.5% while AAPL is up 1.4%
For YEARS the mantra of every Apple fanboy was that "market share doesn't matter", e.g. being in first or 5th place (which Apple was for a long time) is irrelevant. So how is it that we now are knocking HP for the audacity of thinking that second place is good enough, for now?
Mr DiFranco sounds like a realist. So refreshing from bombastic Ballmer!
I appreciate that he seem to give Apple the respect and credit it has earned.
However, how can his company make any coin. I believe when you hawk your jewels at Walmart or BestBuy, you get back only half the returns of your own market price? If so, cost to make isn't covered and loss not profit becomes your gain.
Oops! Forgot I'd posted much the same before. Still stymied, though glad to complement SD.
Last time I checked, Apple was 'hawking their jewels' at BOTH Best Buy and Walmart.
Sure, if you are making money at it, who cares if you're #2 or #X.
The problem with HP - which you seem to be ignoring - is whether and how they can make money at it with the price cut. Losing money and being #2 is not a good place to be is the the general drift of this thread, if you get the drift.....
Let's be clear - the assertion that HP is losing money at this price point is an assumption. However, probably not a valid one. Most of the manufacturing cost estimates I have seen put it around $300 to build so at $400 you are still talking a 20% margin. That's not as good as Apple, but it isn't 'going broke' either.
For YEARS the mantra of every Apple fanboy was that "market share doesn't matter", e.g. being in first or 5th place (which Apple was for a long time) is irrelevant. So how is it that we now are knocking HP for the audacity of thinking that second place is good enough, for now?
Pay attention! Marketsahre in lieu of profits doesn't matter. Just look at how that has worked out for Acer. Look at where Dell is heading. Now look at Apple's profit in every area of business compared to the competition.
Although they're probably selling it for a loss, I expect they plan to make up for it in added volume.
I fail to see how selling a product at a loss per unit can be made up "in volume".
To truly appreciate deh2K's comment, you have to go back and read Joseph Heller's classic Catch-22. Only substitute HP for 1st Lt. Milo Minderbinder.
Let's be clear - the assertion that HP is losing money at this price point is an assumption. However, probably not a valid one. Most of the manufacturing cost estimates I have seen put it around $300 to build so at $400 you are still talking a 20% margin. That's not as good as Apple, but it isn't 'going broke' either.
You need to understand the difference between gross margin and operating margin.
Let's be clear - the assertion that HP is losing money at this price point is an assumption. However, probably not a valid one. Most of the manufacturing cost estimates I have seen put it around $300 to build so at $400 you are still talking a 20% margin. That's not as good as Apple, but it isn't 'going broke' either.
iSuppli priced the iPad-2 at $326, just for materials, add a small amount for labour, maybe some more for patent royalties and you're up to say $350 cost per unit.
That would put the HPs gross margins much lower than 20%. Then once you added in the costs of marketing, R&D, advertising etc. there's no real doubt that the business is operating at a loss.
Some good points. HP, however, has two other advantages that should not be underrated. First, it has a huge patent portfolio. HP isn't going to get squeezed like Google's hardware manufactures. Eventually there will be a day of reckoning for Android manufacturers. Some might even prefer licensing WebOS from HP, as HP has said it is open to the possibility. Apple will not sue HP as the companies respect each other (HP even sold an HP branded iPod at one point).
Second, HP can take an Apple approach like when Apple released OSX for the first time. It can preinstall WebOS on dual boot computers while having a familiar OS like Windows as the default. That is a huge customer base. This will allow customers to play with the OS and become accustomed to it. Unlike Microsoft, HP can afford a slow start with WebOS.
I see HP as the strongest challenger to Apple if HP can hold it together and play its cards right. With that said, I played with the HP Tablet. Currently, it isn't worth the money even with the discount compared to the iPad.
Very interesting. I think you're right, HP could be the strongest competitor.
Well QNX is actually pretty Good. Sure playbook tanked, but so did android and everyone else. I think QNX is equal to webOS on tablets. Of course RIM "borrowed" some design elements from webOS, but overall both are innovative in terms of gestures and are fairly intuitive.
If RIM pushes QNX on phones as well and gear them in a laser focus on enterprise only they will keep their niche and will be very successful.
HP has to succeed in the consumer market (at least touchpad was aimed at consumer market). In this segment we have techies, gamers, old people, music / video / photo geeks, facebookers and students. Apple has all of those categories in the bag.
Google made an appeal to techies and low end which made it successful. I'm not sure what HP has. Maybe printing enthusiasts.
I don't disagree that QNX could be a good product. The problem with RIM is that phones and tablets and laptops are converging with regard to their software and hardware. RIM already exploited there niche (push email) and their niche is evaporating quickly. RIM has no distribution channels outside of phones and no real ties to anyone else that does. They have no experience making PCs and they are laying people off. They don't have a chance. The only question is how much cash they will produce before they die and how much will their assets be worth in an acquisition or sale.
Pay attention! Marketsahre in lieu of profits doesn't matter. Just look at how that has worked out for Acer. Look at where Dell is heading. Now look at Apple's profit in every area of business compared to the competition.
I understand that, but I think the comments here have, in general, greatly distorted the facts. Lets look at your statements above, for instance. You are comparing Apple with Dell, and then asserting that this is foreshadowing for HP. But what you should be doing is comparing HP to Dell and Acer, not comparing Acer / Dell to Apple and trying to map your argument to HP.
To be clear, Apple has recently been bouncing back and forth between being the first or second most valuable company ON EARTH. Apple enjoys incredible margins that are not the norm in the industry as a whole. To look at Apple and suggest that every company unable to measure up to their margins must somehow inevitably be doomed to failure is, I think, a gross exaggeration.
Hey, nice analysis. There are points I agree with as well as those that I don't, but still, nice analysis.
On the other hand, saying RIM is dead and their only options are to go belly up or being sold is very premature I think. Unless I'm wrong (if I am, then your scenario is probably close to being true), although their business is going downwards and they may be bleeding money right now, they still have, last I heard, a huge supply of $$$ from when they were making a killing. So assuming they make the right moves, they could get out of their trail spin to survive.
Very true that RIM has plenty of cash on hand. However, they don't have the ability to spend it in a way that will give them an advantage in the market (Maybe they could partner with someone????). Cash is important, but it can't solve everything. Warren Buffet has more cash than RIM, but no one thinks he could win the mobile computing war. If a company doesn't have the right people, the right skills, and the right connections, they won't succeed. RIM's business has so many things going wrong for it I think it is a safe bet to say they will lose this war. It has nothing to do with my like or dislike of Blackberry products. It is an analysis of the market and their business. The next question is what will their assets be worth? That's hard to say because for now the machine is still printing money. I don't own any Blackberry stock because I can't figure out what its value is assuming they lose the war.
iSuppli priced the iPad-2 at $326, just for materials, add a small amount for labour, maybe some more for patent royalties and you're up to say $350 cost per unit.
That would put the HPs gross margins much lower than 20%. Then once you added in the costs of marketing, R&D, advertising etc. there's no real doubt that the business is operating at a loss.
I've seen many such comparisons, with a low around $300 and a high around $330. But it is important to note that these are estimates, and these third party organizations simply don't know what HP's cost per unit is; it is speculative. However, it is very obvious from even these figures that HP is likely not selling each touchpad at a loss, as some here have asserted. And, even given the distinction between gross and operating margin, as someone here pointed out, it is not at all clear that this is a money losing move for HP. I'd like to note that you selected one of the higher cost estimates, and then you added some fictional royalties and other assumptions, plus unspecified gross operating costs... in order to reach your figure. In other words, it is purely conjecture on your part.
Bottom line is this: people here adore Apple (and so do I), but this colors commentary to the extent that it is often impossible to find a single commenter who is able to approach issues rationally and objectively. My view is that the doom and gloom prognostications in this thread are exactly that: lacking in objectivity.
HP is making aggressive moves to try and solidify a contender's position in the market, and I think they have that capacity to do so. Their price cut is part of that strategy; it does not spell the end for HP after having just gotten started, and thinking it does is just immature poppycock.
I understand that, but I think the comments here have, in general, greatly distorted the facts. Lets look at your statements above, for instance. You are comparing Apple with Dell, and then asserting that this is foreshadowing for HP. But what you should be doing is comparing HP to Dell and Acer, not comparing Acer / Dell to Apple and trying to map your argument to HP.
To be clear, Apple has recently been bouncing back and forth between being the first or second most valuable company ON EARTH. Apple enjoys incredible margins that are not the norm in the industry as a whole. To look at Apple and suggest that every company unable to measure up to their margins must somehow inevitably be doomed to failure is, I think, a gross exaggeration.
1) I never stated, suggested or eluded to HP in my comment. It was a comment that stands alone in the thread and goes directly toward your comment about marketshare and Apple.
2) To be clear, "Apple has recently been bouncing back and force between being the first or second most valuable [publicly traded] company ON EARTH." We don't have to state it when talking casual, just like we don't have to state "in lieu of profits" when making a casual comment about Apple's business focus.
I've seen many such comparisons, with a low around $300 and a high around $330. But it is important to note that these are estimates, and these third party organizations simply don't know what HP's cost per unit is; it is speculative. However, it is very obvious from even these figures that HP is likely not selling each touchpad at a loss, as some here have asserted. And, even given the distinction between gross and operating margin, as someone here pointed out, it is not at all clear that this is a money losing move for HP.
Bottom line is this: people here adore Apple (and so do I), but this colors commentary to the extent that it is often impossible to find a single commenter who is able to approach issues rationally and objectively. My view is that the doom and gloom prognostications in this thread are exactly that: lacking in objectivity.
HP is making aggressive moves to try and solidify a contender's position in the market, and I think they have that capacity to do so. Their price cut is part of that strategy; it does not spell the end for HP after having just gotten started, and thinking it does is just immature poppycock.
I think Cloudgazer makes a solid argument that HP could be selling TouchPads at a loss. Nothing wrong with that if you have a solid endgame. Only poor chess players never sacrifice the queen.
What HP needs is enough users to create an ecosystem that devs want to build for. And users want to buy into a decent ecosystem. IT's a Catch-22 unless you shift a factor significantly. One way is to pay devs and another to essentially pay users by reducing the price of your product to the point it's a must have.
With the next revision hopefully they'll have enough users and devs to have a solid tablet ecosystem and can start making some real coin off their investment. Maybe by then they'll have the revision 1 bugs worked out and have a solid smartphone platform to market as well. There is a lot of room for other players in these reborn markets.
Bottom line is this: people here adore Apple (and so do I), but this colors commentary to the extent that it is often impossible to find a single commenter who is able to approach issues rationally and objectively. My view is that the doom and gloom prognostications in this thread are exactly that: lacking in objectivity.
Objectivity is fine, objectivity is great, let's try some shall we? Apple's average gross margin is around 40%, yet their operating profit is far lower. Once you've taken out all the fixed costs they're down to more like 25%. So around 15% is used for the fixed costs.
Even based on your estimate that HP has 20% Gross margins that would mean that their net margins would be around 5%, and that's assuming that the fixed costs only reduce margins by 15%. In fact we have every reason to assume that fixed costs reduce profits for the touchpad by far more, because the cost of developing/marketing/etc the touchpad is not 1/10th the cost of developing the iPad but it does sell 1/10th the units (or worse).
If you believe that HP is making money on the touchpad business and you wish to claim that this is a rational objective belief then you're going to have to produce some evidence.
Vivid imagery. Perfectly put.
Yes, incompetent footsteps like Android, until they turned into a sprint flashing past them? Get over yourself - incompetent. Jesus.