HP's TouchPad fire sale: 4 effects

After Hewlett-Packard announced last week that it would shut down its tablet and smartphone operations, retailers began offering HP's TouchPad tablets for as little as $99 — down from the original $399. A sellout frenzy quickly ensued, as customers grabbed hundreds of thousands of the bargain tablets. What will the fire sale mean for HP and the tablet industry? Here, four predictions:

1. Apple will benefit

The HP flood "could drive low-volume tablet makers out of the market," says John P. Mello Jr. at PC World. Apple sells some 9 million tablets each quarter, so Steve Jobs won't exactly be crippled by the sale of a few hundred thousand TouchPads. Companies like Samsung and Research in Motion, however, are lucky to move 500,000 tablets in a quarter. HP's fire sale will hurt their numbers. Ultimately, that could give Apple an even bigger chunk of the market.

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2. HP's reputation will take a blow

Eager TouchPad buyers struggled to purchase bargain tablets on HP's e-commerce site and through overloaded phone lines at the HP call center, notes Larry Dignan at ZD Net. The company said it couldn't handle the "overwhelming demand," but since HP is in the IT infrastructure business, it should have been able to prevent such problems. Yeah, "there's irony," says Joe Wilcox at BetaNews. "HP is supposedly ditching TouchPad and possibly unloading its PC biz to refocus on" business services, but "what does it tell possible enterprise clients about HP when its own store errors out"?

3. Tablet pricing will be thrown in flux

The TouchPad may have been flawed, but its exit from the market at fire-sale prices may force other tablet makers to slash their prices, too, says Dignan. "It's no wonder retailers initially balked at HP's prices. If the TouchPad is ultimately worth $99, what's an Android tablet worth?" If Google tablets want to really compete with Apple, they're going to have to offer a much better price — $250 max.

4. HP's relationship with retailers will suffer

Scrapping its mobile business hasn't endeared HP to retailers, and the fire sale won't help either, says Forbes. Best Buy is losing money on the fire sale, and it may soon find its in-store help desk swarmed by angry customers after HP stops offering any support for the product. Not a great way to make friends.