TouchPad Encore Will Keep HP’s Suppliers From Getting Touchy

Published on September 1, 2011
by John Paczkowski

Hewlett-Packard’s surprising decision to produce another run of its TouchPad tablet so soon after announcing plans to discontinue it might be the result of a poorly thought-out strategy, but it’s not nonsensical. As we suspected, there’s a very good reason for it, beyond satisfying the sudden “cultlike” demand for the ill-starred device: Appeasing the suppliers that manufactured components for it, expecting production runs of 500,000 to one million units.

“While the company is stating it is doing so to satisfy stronger than expected demand, our checks with supply chain sources indicate another reason may be to fulfill commitments to component suppliers and manufacturing partners,” Sterne Agee analyst Shaw Wu says. “This makes sense as it is not in HP’s interest to alienate the supply chain base and the company may not lose as much money as it is bringing in some revenue as opposed to taking a full write-down on commitments with no revenue.”

Better to meet those supply-chain obligations than annoy the supply chain, which will presumably continue to figure prominently in HP’s PC business whether the company spins it off or sells it outright. And if you generate a bit of buzz in the process, all the better. As Wu notes, the larger the installed base of TouchPad and webOS devices, the more valuable webOS is in a potential sale.

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