GO
Loading...

Sell Big or Die Fast

Seven weeks after it was put on sale, Hewlett-Packard killed its TouchPad tablet, the company’s competitor to Apple’s iPad.

Last year, Microsoft pulled the plug on itsKin mobile phones only 48 days after they went on sale.

HP 9.7" Touchpad
Photo: hp.com
HP 9.7" Touchpad

In recent years, technology companies have been cutting their losses with increasing speed. Google proudly released Wave, its platform of collaborative work tools, to the general public in May 2010. It canceled Wave 77 days later. Palm announced its first tablet, the Foleo, on May 30, 2007. By Sept. 4, the company halted development and the product was never sold.

Pure Digital, maker of the Flip camcorder, had planned to release the Flip-Live on April 13, but Cisco , which had acquired Pure Digital in 2009, shut the entire division on April 12.

These days, big technology companies — particularly those in the hypercompetitive smartphone and tablet industries — are starting to resemble Hollywood film studios. Every release needs to be a blockbuster, and the only measure of success is the opening-weekend gross. There is little to no room for the sleeper indie hit that builds good word of mouth to become a solid performer over time.

When Microsoft released the Xbox 360 in 2005, there were widespread reliability issues and the console faced serious competition from the Nintendo Wii, yet the company stayed the course, and now the Xbox is one of the best-selling video game consoles of all time. That kind of tenacity seems to be in diminishing supply.

Some analysts trace the origin of this blockbuster-or-bust mentality to Apple . Each release of the company’s popular iPads and iPhones crosses over into being a mainstream media event. Al Hilwa, an analyst at the research firm IDC, described the accelerated lifecycle of high-end hardware as “Darwinian.”

“There’s a level of desperation from anyone whose name is not Apple,” said Mr. Hilwa.

The crush of tech bloggers and Twitter-using early adopters who chronicle every bit of news — good and bad — about new phones and tablets also raises the stakes around how well new products perform in the marketplace.

“You know pretty quickly, and in a very public way, whether a product is successful or not,” said Mr. Hilwa.

Similar to opening week at the movies, early reviews on the Web panning a new tablet or phone can be disastrous for its makers.

“Once you lose momentum, its hard to regain it,” said Chris Jones, an analyst at Canalys.

The rapid life cycles of products can play with the affections of consumers, who may rush out to be the first on their block with a new product, only to find that the manufacturer has canceled any future support or development weeks after it went on sale.

Neal LoCurto, the owner of TeamLogic IT, an information technology consulting company in Syosset, N.Y., said he bought his TouchPad the morning it went on sale. “On release day I went to Best Buy that morning and waited at the door,” Mr. LoCurto said. “I was the first one in and the first one out.”

Mr. LoCurto, who ultimately grew unhappy with the TouchPad because of the lack of apps, received a refund for his TouchPad, but he says he no longer trusts H.P. “I feel like they lied to us,” Mr. LoCurto said. “They didn’t give it a chance.”

Companies kill new products more quickly now because of the higher cost of staying competitive, said Jim McGregor, research director for In-Stat, a market research firm. Quickly pulling the plug on an obvious failure makes sense, although it can be embarrassing.

“The life cycles are very short because there is obviously huge competition,” Mr. McGregor said. “Even if you do have a blockbuster, you know you’re going to get leapfrogged in six months. You have to come out with something that really knocks off the pants and then follow it up. You can’t just sit there and say, ‘Hey, I’ve got a success.’ ”

In the case of the TouchPad, analysts agree it failed because its operating system, webOS, had few of the apps that made Apple’s iPad a runaway hit, he said. Microsoft’s Kin had a similar problem.

Mr. McGregor said that Google TV, Google’s Internet-connected television accessory, faded into obscurity because of content providers declined to make their content available. Google had lined up various manufacturers as partners, including LG, Toshiba and Sharp, only to tell many of them last December to delay the release of their Google TV products. While Google’s strategy for Google TV remains unclear, none of those partners have come out with a Google TV product.

“The content is worth more than the device,” said Mr. McGregor. “If you don’t have everything — the content, the applications and the experience — you might as well drop your anchor and jump off the ship.”

Even mighty Apple was not always so skilled. Like other companies today, Apple suffered a streak of bad luck with new products more than a decade ago and, like them, it cut its losses. The company killed the Power Mac G4 Cube, a desktop computer, in 2001 after only 11 months because consumers believed the price was too high and balked at having to buy a monitor separately.

Two days after announcing it would kill the TouchPad, H.P. started unloading its inventory through a fire sale. The steep discount — 80 percent off the original price — succeeded in setting off a buying frenzy that H.P.’s executives had hoped for when they introduced the device.

H.P.’s online store, along with Best Buy, Target and Wal-Mart, quickly ran out of TouchPads after putting them on sale for $100 for the 16G version and $150 for the 32G version. When originally available in July, they were listed at $500 and $600.

People strategized on online message boards about how to find a TouchPad. H.P.’s call center was overwhelmed.

“All this clamoring for the TouchPad, kind of bittersweet,” H.P.’s customer service arm said in a post on Twitter.

Symbol
Price
 
Change
%Change
CSCO
---
HPQ
---
MSFT
---
AAPL
---
GOOGL
---

Featured

Contact Technology

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    › Learn More

Squawk Alley