HP TouchPad frenzy convinces HP to revive tablet

HP TouchPad will go on sale again at the same $100 price as soon as HP can restart assembly lines. What will Apple do?

Did you miss your chance to get your $100 HP TouchPad tablet? Still dreaming of loading a $100 tablet with books to read in bed, apps for the entertainment system, or cookbook recipes for your kitchen? Looking for a great Christmas present that won't cost as much as an iPad?

As soon as Hewlett-Packard announced the shocking price drop of their TouchPad tablets to a mere $100, every retailer has been sold out. Until that point, retailers had been loath to stock the device as it had a reputation for gathering dust on shelves. At its $499 price point, consumers were choosing iPads. Then for a short period, HP dropped the price to $399, but consumers held back, hoping for yet another price drop.

Just a week later, HP granted those consumers their wish. The units that cost HP an estimated $300 to manufacture were slashed to a jaw-dropping $100. But along with the TouchPad news came the news that HP, like IBM had done before it, was getting out of the WebOS device business altogether and would be ending production of devices such as the TouchPad effective immediately.

Best Buy, which had previously tried to sell their inventory back to HP, had customers lining up to buy the devices.

The weekend after the $100 price cut was hectic. Some retailers did not update their online prices fast enough, causing their phone banks to become jammed as customers called asking to place their order over the phone.

Enter free market economics

Since the frenzy 10 days ago, retailers have sold out of the HP TouchPad. Amazon now lists the 16Gb for $230 and eBay bidders are bidding the same.

But with the estimated cost per unit of $300, and their previous announcement that they were discontinuing all WebOS devices, it seemed unlikely that HP would begin producing more TouchPads, or continue to sell them for $100. But that's exactly what they will be doing.

HP stated Tuesday, that, “since we announced the price drop, the number of inquiries about the product and the speed at which it disappeared from inventory has been stunning.”

The announcement on the HP blog was vague but left no doubt that more TouchPads were on the way. “We have decided to produce one last run of TouchPads to meet unfulfilled demand," HP said. "We don’t know exactly when these units will be available or how many we’ll get, and we can’t promise we’ll have enough for everyone. We do know that it will be at least a few weeks before you can purchase.”

HP stressed the limited supply of this final run, and estimated that they would be available by the end of October for the $100 and $150 price points previously offered for the 16 Gb and 32 Gb units respectively.

An offer like this only comes... twice in a lifetime. This time around, consumers already know the real market value of the TouchPad is closer to $230 so no matter how many units HP churns out, they are likely to be snatched up at the proposed price point. If HP waits until the end of October the TouchPad will become the hottest gadget to get for the holidays and will threaten holiday earnings for Apple's iPad.

This begs the question: Will Apple have to counter with a drastic price reduction of their iPad in October?

This could get interesting.