Hewlett-Packard launched its TouchPad (Photo ©Tom Raftery) touchscreen tablet with big ambitions, beginning on July 1 in the U.S.A. to continue on July 15 in Canada, UK, France and Germany and finally on August 15 in Australia.

The TouchPad was designed as a high quality product to be a worthy competitor in particular of the iPad but also of Android tablets. However, the TouchPad uses WebOS 3.0 as its operating system. The launch price was in line with its competitors: $499 for the version with 16 GB of flash memory and $599 for 32 GB version.

The reception of the TouchPad wasn’t particularly warm. Many have pointed out that the HP tablet wasn’t feasible as an alternative to the iPad at the same price. The iPad has a huge amount of applications and is trendy, the TouchPad has a limited amount of applications and as for the appeal it’s anonymous. Since the price is the same you might as well buy an iPad 2.

In mid-August the magnitude of the problem for HP was understood when news came that Best Buy had sold only 25,000 of the 270,000 TouchPads available in its stores, less than 10%. Sometimes the term “epic fail” is overused but this time it suits that situation.

The TouchPad debacle led to profound consequences at HP. On August 18 the company announced the abandonment of all devices with webOS and also the possible sale of its PC division. They left the door open to other solutions for webOS. Regarding this operating system, the latest insult for HP came from those who tried to install it on an iPad and found that its speed is roughly twice as much as on a TouchPad. In short, it seems that the hardware chosen by HP for its tablet wasn’t as good as its competitor’s.

So far it just looks like the story of a failed product but on August 19 HP decided to get rid of the TouchPads with a fire sale. The price of the 16 GB version was reduced to $99, the price of the 32 GB version was reduced to $149. In essence, the model with 16 GB now costs one fifth of the introductory price while the 32 GB model now costs one quarter of the introductory price. Similar price reductions were adopted in the European countries where the TouchPad was on sale and in Australia.

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The reaction was very quick: the same product that until then had been rejected, suddenly got sold out in little time. Retailers who didn’t know what to do with the TouchPads were forced to cancel orders because they ran out of stock or order more of them from HP.

Obviously it’s easy to sell a product that is considered good by those who tried it at a price that’s very low compared to competitors, especially after information started arriving about how to install Android and even Ubuntu Linux on a TouchPad. Considering the fact that the future of webOS is uncertain, having the possibility to install on the TouchPad an operating system which certainly has a future and a huge amount of applications available makes it even more of a great bargain for those who were able to buy it.

I can’t help wondering how it was possible to make such a blunder by HP executives about the possibility of selling the TouchPad at the same price as the iPad. Let’s remember that webOS was created by Palm and HP spent $1,2 billion to buy that company: if they don’t find other ways to make a profit from this operating system the result of this assessment error will be even more catastrophic for HP.

This is a harsh lesson for HP, which has learned it the hardest way, and for anyyone who has to decide on the price of a new product that has one or more very strong competitors.