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Based on our Discounted Cash Flow (DCF) analysis of the notebook PC businesses of Apple (NASDAQ:AAPL), HP (NYSE:HPQ) and Dell (NASDAQ:DELL), we've estimated that Apple's notebook business is more valuable than that of HP and Dell combined. Apple's higher valuation is driven by three factors: (1) higher average notebook pricing compared to HP and Dell (2) growing market share (3) higher margins (making Apple notebooks more profitable).

Notebook PC Valuation


Apple: $22 billion
HP: $12 billion
Dell: $6 billion

For all three companies, the notebook PC business is more valuable than the desktop business given the on-going shift in demand from desktops to notebooks so figures above also give you a sense of the comparison for their overall PC businesses.


Key Valuation Metrics

Avg. Notebook
Pricing (2009)

Notebook Market
Share (2009)

Notebook Margins (2009)

Dell

$814

13%

~5%*

HP

$714

21%

7.5%*

Apple

$1,200

5%

33%**


Source: Trefis estimates
* EBITDA margin estimate
** Gross margin estimate


Additional Detail on Trefis Forecasts

Pricing: We expect pricing to continue to decline for all three notebook makers.

  • Apple: $1,200 in 2009 to $699 by the end of the forecast period
  • HP: $715 to $526
  • Dell: $814 to $413


Market Share: We expect Apple to have the largest market share gain while HP has a small gain and Dell has a small decline

  • Apple: 5% in 2009 to 10% by the end of forecast period
  • HP: 22% to 23%
  • Dell: 13% to 12%


Margins: We expect Apple margins to decline but still remain relatively high overall and that HP will continue to have higher margins than Dell

  • Apple (Gross Profit): Decreasing from 33% to 30%
  • HP (EBITDA margin): Increasing from 7.5% to 8.5%
  • Dell (EBITDA margin): remaining around 5%


Disclosure: No positions

Source: Whose Notebook PC Business Is Most Valuable?