HP exits low-cost tablet market in product shakeup

HP is exiting the low-end tablet market amid declining prices and slowing demand. Instead, the company will focus on detachables, hybrids and business tablets at the higher end of the market.

"We are going to focus where there is profitability and growth and will not chase the low-end tablet market. We are focusing on business mobility to deliver tablets built for field service, education, retail and healthcare," said Ron Coughlin, president for personal systems at HP.

HP has already stopped listing many low-end Android tablets on its website. The remaining lower-end products -- the US$99 HP 7 G2 tablet and $149 HP 8 G2 tablet -- have been out of stock for months, and it's likely they won't be available again. They are however still available through some online retailers at cut-rate prices.

The least expensive tablet on HP's site is now the $329.99 HP Envy 8 Note tablet with Windows 10. HP has Windows on most tablets now, with only a handful running Android.

There's no shortage of low-cost tablets from other companies, though. It's easy to find a low-cost Android tablet from little-known device makers for under $100, and big names also remain in the market. Amazon's 7-inch Fire tablet is selling for $49.99. Lenovo, Acer and Asus also offer low-cost tablets.

HP's change in tablet strategy came after the the original Hewlett-Packard split into two companies: HP Inc. and Hewlett-Packard Enterprise. Cutting ties with low-end tablets is among the first decisions of the new HP Inc. to generate more cash flow.

After years of unabated growth, tablet shipments are expected to decline this year. Tablet shipments will total 211.3 million in 2015, a decline of 8.1 percent compared to 2014, according to projections by research firm IDC on Tuesday.

Going ahead, HP's focus will be more on devices that can be used as either laptops and tablets. Products like the Spectre x2 -- which has a detachable screen -- and Spectre x360, which has a screen that folds to turn into tablet, are examples of HP's current focus, Coughlin said.

Reflecting HP's direction, IDC is predicting that detachables will take more share from small-screen tablets in the coming years. Tablets with screens smaller than 9 inches will have a 57.7 percent share of shipments in 2015, down from 64.1 percent in 2014, IDC said. The share of 9- to 13-inch tablets will grow to 41.9 percent in 2015 from 35.8 percent in 2014, it said.

The strategy followed by HP is similar to that of Apple and Microsoft, which offer premium tablets. And like HP, Dell has been scaling back its low-priced tablet offerings to focus on profitability. Dell wants to offer premium tablets and hybrids with features like 3D cameras and high-resolution screens.

In the tablet product shakeup, HP's low-end PC range remains largely intact. The company is still offering the inexpensive Chromebooks and Stream PCs with Windows 10. Demand for those products is big in consumer and some business segments, said Mike Nash, vice president of customer experience and portfolio strategy at HP.