I don't think HP meant for the TouchPad to fail. This was to be glorious unveiling of a new Windows-and-Google-free operating system. But somewhere along the path to failure, HP discovered a diamond in their rough. It is now up to HP management to make the most of this opportunity.
Let's start with the core challenge facing the platform: WebOS had very few users. Without users, there wasn't much developer interest or investment. Without apps, there wasn't value to users. Behold the virtuously circular death spiral of the failed ecosystem.
However, when HP brought their TouchPad prices down to a ridiculously low level, they brought on an incredibly large number of active new users. Developers want to see two things in a platform:a significant user base and the potential for long term growth. It is now up to HP to instill confidence in the developer community that WebOS will live to see another day.
After failing to succeed, it is now in HP's hands to succeed at failing. HP now has a sizable and growing user base that could attract developer interest. HP's challenge is to instill confidence among developers, in the future of WebOS. The longer the HP continues to publically waiver on the future of WebOS, the less confidence users and developers will have in the platform. The less interest that users and developers had in the platform, the less attractive the platform will be to prospective buyers.
If HP can get their act together, they just might be able to find a happy ending in this debacle. This could be why HP will continue to manufacture products they are selling at a significant loss. And who knows, with increased demand, they may be able to increase their pricing and attract a new, loyal, advocate fan base.
Here's to happy endings.