Signs of a Potential Rebound in Dell's Notebook Market Share

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 |  Includes: DELL, HPQ
by: Trefis

Dell (NASDAQ:DELL), which competes with HP (NYSE:HPQ), Acer, Lenovo and Apple (NASDAQ:AAPL) in the global PC market, has reported a 27% rise in its notebook unit sales in the first quarter of 2010. This resurgence is good news for the world’s 3rd biggest PC maker, which has in the past lost its market dominance to competitors such as HP and Acer.

We have increased the Trefis price estimate of Dell’s stock from $14 to $16 in part to reflect the improved outlook for Dell’s market share in global notebook shipments. Below we discuss in detail the recent trends for Dell’s notebook business.

Dell Notebook’s Unit Growth Beats that of HP

The first quarter of 2010 saw Dell’s notebook shipments grow by 27%, beating HP’s reported 19% year over growth. Dell has been struggling hard to defend its notebook market share in a very competitive environment and the data from the first quarter of 2010 suggests reason for optimism for Dell.

Dell’s sales benefited from the launch of the Vostro 3000 series targeting small businesses and upgrading of its Latitude family of commercial notebooks with Intel’s (NASDAQ:INTC) latest Core i5 and Core i7 processors. In addition, Dell provided attractive financing options to its small and medium business customers which aided the uptick in unit sales.

Notebook Market Share Rebound in 2010

With strong sales during the first quarter and the on-going corporate PC refresh cycle expected to continue through the second half of 2010, Dell’s notebook business is set to rebound.

We have updated our 2010 outlook for Dell’s market share from a previous slight decline to 1% growth, expecting Dell market share to reach 14% in 2010. However, we still expect that Dell market share will trend down to about 13% over the Trefis forecast period.

In comparison, we expect HP’s market share in notebooks to improve by only half a percentage point in 2010 as its desktops are in greater demand among businesses than its notebooks.

You can modify our forecast for Dell’s notebook share in order to see the additional upside to its stock, if Dell’s share in global notebook shipments were to grow more than we currently forecast.

You can see our complete model for Dell’s stock here.

Disclosure: No positions.