TouchPad Downgrade Highlights iPad Dominance

Hewlett Packard (HPQ) reduced the price of its TouchPad tablet computer again, highlighting the uphill battle manufacturers will need to overcome as they go head-to-head against the dominant Apple iPad line of tablets.

The Palo-Alto Calif.-based HP reduced the price of the 16GB version of the Touchpad to $399, $100 off the retail price. This comes just after reducing the price $50 only days earlier.

This makes the TouchPad $100 less than the entry level Apple iPad 2, the tablet currently dominating the market.

While HP has not released any official figures, analyst sentiment indicates that the TouchPad is having a difficult time wooing consumers, with lukewarm reviews criticizing the usability and poor battery live.

"In general, our checks indicate good sell-in but soft sell-through for non-iPad tablets," UBS analyst Maynard Um told investors, adding volume was a "limited critical mass for Research in Motion (RIMM) and Hewlett-Packard (HPQ) despite in-store marketing."

While the analysts predicts worldwide tablet computer market to 60 million units this year, up from 55 million previously, Apple should command almost 40 million units, or 66 percent of the market.

Much of a tablet's success is based on a the ecosystem of apps, or software, that is available to the end-user. HP is far behind Apple or even the No.2 tablet platform, Google's Android.

"In the case of tablets, the only thing that matters-that turns what's otherwise a slab into a versatile device-are the apps," says Needham & Co,'s Charlie Wolf. "And the applications available on the tablets introduced this year number at best in the hundreds In comparison, more than 100,000 applications are available on the iPad."

The TouchPad was launched following HP's $1.2 billion acquisition of Palm and its WebOS platform last year, which powers the device.

iPad Users Most Satisfied

When U.S. tablet owners were asked if they would recommend their tablet to friends and family by market researcher IHS, Apple users ranked the iPad an 8.8, higher than any of the 11 other brands in the survey.

More than 80 percent of Apple owners rated their tablet at 8 or higher, and fewer than 1 percent gave a rating of less than 5.

"Apple's competitors in the tablet market already are facing major challenges in offering products that can match the iPad's combination of optimized hardware, software, operating system, applications, content and app store," said Rhoda Alexander, director of monitor and tablet research at IHS.

"Now they are facing the reality that consumers in the key U.S. market really love their iPads, with owners expressing satisfaction with Apple's products in a variety of key measures. "

Surprisingly China's Shenzhen Zenithink came in a close second at 8.75, although the overall sample for that model was comparatively small, while Samsung , with a much larger respondent sample, was third, scoring an average of 8.5.

HP was No. 9.

Rivals Get No 'Traction'

Apple boosted production of the iPad during its third quarter and "sold every iPad we could make," according to CFO Peter Oppenheimer, adding that the company hit 9.52 million units in the quarter.

Apple ended the quarter with a little over 1 million units of the iPad in inventory, below the company's target range of 4 to 6 weeks of inventory.

COO Tim Cook said Apple is confident in the appeal of its products given the wealth of the applications in its App Store and its relationship with developers in general.

"It also doesn't appear that the other tablets are getting any traction to speak of," said Cook, and he may be right.

Motorola said last week that shipments of its "Xoom" tablet computer will be lower in the current quarter than the 440,000 units shipped last quarter. It expects to move just 1.5 million tablets for the full year, a far-cry from 9 million iPads move d just last quarter.

Blackberry maker Research in Motion cut its Playbook tablet shipment estimates to 2.5 million from 3.6 million for the entire year.

And it doesn't appear that these dynamics will change, according to the IHS survey.

Apple Medium-Term Winner

A full 61 percent of the U.S. owners surveyed said they would stick to the same brand for their next tablet purchase. More than half of owners indicated that they were considering a purchase, planning a purchase or would definitely purchase another tablet during the next 12 months.

The findings suggest that Apple will maintain its lead into the conceivable future.

"With the iPad dominating tablet sales in the United States and worldwide, this high level of consumer satisfaction commanded by Apple represents a major barrier to entry for new competitors," IHS said.

Observers are also eyeing a new, special iPad 3 that could further the woes of rival tblet makers.

Based on increased evidence in the supply chain, the iPad 3 may ship as early as this fall, featuring an enhanced display, upgraded cameras and faster wireless capabilities - which could make our estimates conservative," analysts say.