The end of HP iPod?

[iPost]

Engadget reports that HP has stopped placing orders for the iPod after a dispute with Apple over price protection policies.

Full post here: http://www.engadget.com/entry/1234000077027466

[UPDATE] AppleInsider was the first to break the story. The original AppleInsider post here: http://www.appleinsider.com/article.php?id=840

[dsharits]

Interesting. I wonder if this will affect the rumored HP iPod Photo, if this is indeed true.

Daniel

[iPost]

I wonder if Apple has managed to bring manufacturing costs down to prepare themselves to bring prices down if a price war were to start.

With so many companies entering the portable MP3 player space, a shakeout is inevitable, which means those companies that aren't making it will probably slash prices to the bone in a last-gasp effort to stay afloat. And, this may force prices down in the entire market.

Perhaps Apple is anticipating this and getting ready for it. And perhaps HP is nervous about it.

[3Memos]

Surprising to see HP only sold 7% of the roughly 4.5 million iPods during last quarter. Given HP's immense channel distribution, that figure looks to be a dismal failure. HP may be asking for price protection, as a way to reduce inventory, in the event of an anticipated move by Apple to reduce iPod prices by at least $50 as widely speculated, and even expected.

[applemacdude]

good they did have the hp logo after all...

[Kingsnapped]

Looks like PDiddy's $9999...? HPpod was worth the investment for them.

[Abstract]

I wonder if Apple has managed to bring manufacturing costs down to prepare themselves to bring prices down if a price war were to start.

With so many companies entering the portable MP3 player space, a shakeout is inevitable, which means those companies that aren't making it will probably slash prices to the bone in a last-gasp effort to stay afloat.

While its true that people will have to slash their prices in order to stay afloat, I can't agree with that when referring to Apple and their iPod line. They don't need to slash their prices because they're what everyone wants. Its not their product that's struggling to gain identity in a market with so many HD and flash-based players. The iPod is synonymous with mp3 players right now, and if whether they slash prices or not, it won't really affect marketshare. If they kept their prices the same, and their marketshare went down, it's not due to their hesitance at slashing $50 off the price. It probably would have happened anyway as competition increases.
People who are thinking of getting an iPod will get one whether it's $50 cheaper or not. If they can't afford it, they won't be able to afford it even with $50 off. Or they'll get an iPod mini.

[Blue Velvet]

You mean there's actually been a beginning?

Have seen or heard absolutely nothing about the HP iPod here in the UK... it's a mythical creature only discussed in forums like this.

[wdlove]

This just shows competition at work. I imagine that after the Keynote all the MP3 competitors are feeling some fear. Only the best will win.

[Daveway]

I'm glad to see them go if they do go. The sales were just a drop in the bucket and nobody wants an HP logo polluting their pristine iPod anyway.

[Koodauw]

I'm glad to see them go if they do go. The sales were just a drop in the bucket and nobody wants an HP logo polluting their pristine iPod anyway.

I'll second that, although I think the packaging of iTunes with all HP computers will be missed.

[imac9556]

Apple might want to do something about this though... When I was at my bestbuy the other day, I heard a customer asking for the hp iPod, they wanted an hp ipod because when the person said they didn't have any, but they had the Apple ones in stock, they didn't want it. Same story at my compusa too... I don't know how much it will affect Apple if the Hp ipod goes away..(>2%?)

[russed]

You mean there's actually been a beginning?

Have seen or heard absolutely nothing about the HP iPod here in the UK... it's a mythical creature only discussed in forums like this.

exactly! i dont even know what colour they are meant to be! they are blue arent they?

[verozov]

its really wouldn't be that bad except for the fact that some mis-informed customers think that the HP iPod is the only one that works with Windows, or that HP actually helped Apple create the iPod...

[leftbanke7]

I'm glad to see them go if they do go. The sales were just a drop in the bucket and nobody wants an HP logo polluting their pristine iPod anyway.

Mine has that hideous thing on the back. I am currently looking for a sticker to cover it up.

[iPost]

While its true that people will have to slash their prices in order to stay afloat, I can't agree with that when referring to Apple and their iPod line. They don't need to slash their prices because they're what everyone wants.

I respectfully disagree because I think we're past the initial wave of people willing to pay that premium. Look at what happened with DVD players... everyone wanted them too, but initially they were too expensive for most people's budgets.

To hear the media tell it, everyone has an iPod, and if they don't already have one, they're soon going to get one. But the fact is not everyone does. Not even by a long shot.

According to the Consumer Electronics Association, the outfit that put on the International Consumer Electronics Show earlier this month, household penetration of MP3 players--not just iPods but all brands--in the U.S. runs about 15%. That makes MP3 players one of the least popular consumer electronics product among U.S. consumers, ahead of only digital television sets, pagers and home fax machines and behind such items as liquid crystal display TV sets and satellite TV systems.

By comparison, DVD players had reached 15% penetration by January 2001, after about three years on the market. As of this year, they're now in about 75% of U.S. households.

Prices matter. Looking at DVD player sales: In 1999, U.S. consumers bought some 4 million DVD players at an average of $270 each. By 2003, they scooped up 23 million units at an average price of $138--more than five times volume at about half the price over the course of four years.

If history is a predictor, we're in for an old fashioned price war.

[hcuar]

You mean there's actually been a beginning?

Have seen or heard absolutely nothing about the HP iPod here in the UK... it's a mythical creature only discussed in forums like this.

I've only seen them at Costco and Sam's Club. (Costco and Sam's are warehouse stores that typically sell bulk items and things at dicount. Sam's Club is affiliated with Walmart.)

[mox358]

At Radioshack, we've actually had a lot of success with the hp iPod. We can't keep them in stock to save our lives. People ask for MP3 players and see all the Motorola, Creative, and other cheap brands and then the iPod, and they already know the iPod name. Once you explain it a little to them, and the differences, you've almost always got a sale.

I'll be kind of sad to see them go if this is true - because they make me a lot of money AND since we have a deal with hp/compaq I doubt we'll be getting the real Apple ones in. It would be sweet if we did however, we'd never sell any of the other cheap ones with iPod Shuffles in stock.

Just my 2 cents.

[Benj]

I wonder if Apple has managed to bring manufacturing costs down to prepare themselves to bring prices down if a price war were to start.

With so many companies entering the portable MP3 player space, a shakeout is inevitable, which means those companies that aren't making it will probably slash prices to the bone in a last-gasp effort to stay afloat. And, this may force prices down in the entire market.

Perhaps Apple is anticipating this and getting ready for it. And perhaps HP is nervous about it.

I would have thought it is more likely that Apple are trying to demand a high price and HP want to knock them out on the cheap.

[Mechcozmo]

The iPod is synonymous with mp3 players right now, and if whether they slash prices or not, it won't really affect marketshare.

I agree. It is like the way that Nintendo or Playstation became synonymous with "Video Game" at least, that ones that were played on the TV.

Although the MP3 players may only be in 15% of households, I think that is going up slowly. I know quite a few people who recently bought an iPod, or where because a brother has an iPod the sister wants one too.

And the Shuffle should help Apple with their marketshare woes, but in a different market. Just by making an "iPod" that is below the magic line of $100, there will be quite a few orders placed. We've already seen that happening, eh?

[neut]

CompUSA carries them still (20G) ... not for long.


peace.

[clayj]

It's always interesting to analyze the pricing model for an item that is sold not only through a reseller, but also by the company that makes the item. For example, my Sony SDM-P234 monitor had the following pricing:

- direct from Sony: $1999
- from CDW: $1720
- from TigerDirect: $1599

I bought it from CDW for $1620 after invoking their price matching guarantee.

The big question is, though, why Sony would think they could get away with charging FULL MSRP on an item that others sell for less. It makes me wonder why anyone buys an item from the manufacturer. Does Apple charge less, or more, for iPods bought directly from them as opposed to iPods bought from HP or another reseller? Logic would dictate that HP's iPods would be MORE expensive than Apple's iPods, since that's another layer of middlemen trying to earn a profit.

Since it sounds like HP was actually undercutting Apple slightly, it makes sense that their profit margins were MUCH thinner, and that any downward adjustment in the retail price of an iPod would only hurt HP.