HP Re-enters the Tablet Market

Chris is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

At this year’s Mobile World Congress Hewlett-Packard (NYSE: HPQ) announced the HP Slate 7, a $169 7-inch tablet that runs Google’s (NASDAQ: GOOG) Android OS. This device is the first HP tablet with a mobile operating system to surface since the HP TouchPad, which had a calamitous run.

For those not keeping score, the HP TouchPad ran the ill-fated WebOS and had a 49-day run in the US. WebOS played a major role in HP’s decision to acquire Palm, which was responsible for the development of WebOS. Shortly after the TouchPad was launched in the US, HP announced that it would be discontinuing all WebOS devices, and the remaining tablets were deeply discounted.

At a price-point of $169, the Slate 7 is $30 less than Amazon’s (NASDAQ: AMZN) Kindle Fire HD and Google’s branded tablet, the Nexus 7. Price isn’t the only point of differentiation; the Slate 7 also boasts Beats Audio and the ability to print wirelessly from almost any app as well as front and rear facing cameras. Unfortunately, the Slate 7 pays for its lower price with some questionable hardware choices. The screen is lower resolution, and it packs less onboard storage, though it does have a micro SD slot for further expansion.

While it is certainly priced to move, it is unclear whether the Slate 7 will have much of an impact on the tablet market. As pointed out above, the device is in-line with competitors, at a cheaper price, but the hardware falls a little short. It is also questionable whether HP can make enough profit off the devices to make them worthwhile. When Amazon launched the original Kindle Fire, it notoriously took a loss on every device sold. According to IHS incremental improvements have allowed it to the reduce production costs of the Kindle Fire HD, but it is clear the retailing giant isn’t counting on hardware sales to boost the bottom line.

Amazon and Google both benefit from their extensive eco-system, with app and media sales providing a steady stream of revenue and helping to offset the costs of subsidizing hardware. Apple (NASDAQ: AAPL) was the first to really focus on building its ecosystem, relying on the walled-garden of iOS to retain customers and provide incremental revenues. While Apple’s iPad commands a premium price and enjoys a much healthier margin than its competitors, the app store provides a healthy boost to each device’s profitability. Unfortunately, HP lacks a well developed ecosystem behind its devices, which makes the stakes even higher. Until a firm like IHS gets their hands on a Slate 7 to determine production costs it is hard to know for sure, but it would be a stretch to assume the firm will squeeze much profit out of the device.

The Slate 7 is also entering a heavily saturated market with little to make it stand out. Beats Audio has certainly taken the headphone market by storm and printing from apps might be convenient, but they’re hardly major selling points. While the device will have access to the Google Play ecosystem, plenty of others do, including Google’s own Nexus 7.

In the end, while it is encouraging to see HP reentering the consumer tablet market, the Slate 7 may end up being a misfire. The strongest attribute is the price, and it otherwise fails to stand out from the crowd. HP may have been better off going in a direction similar to Microsoft and launching a premium tablet to showcase the company’s engineering prowess. As it stands the device will likely get lost in a sea of Android devices and do little to reestablish HP’s consumer mobile presence.

TigerAnalyst has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Apple, and Google. The Motley Fool owns shares of Amazon.com, Apple, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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