Growing Notebook & Netbook Market Will Boost Dell’s PC Business

We expect the growth in notebooks and netbooks will benefit computer makers like Dell (NASDAQ:DELL), Apple (NASDAQ:AAPL) and HP (NYSE:HPQ). Dell’s PC market share, in particular, has been declining over the years. It’s trying to improve its position by building up on its cloud offerings, and expanding its foray into tablets. This combined with the booming notebook and netbook market should help Dell regain its lost market share.

While we anticipate global shipments of notebooks and netbooks will reach 380 million by the end of Trefis forecast period, Trefis  members expect the sales will near 420 million. We currently have a Trefis price estimate of $20.84.

After Notebooks, Netbooks Take the Lead

The global sales of notebooks and netbooks combined have grown at a rate of above 25% annually over the past few years with an increasing consumer shift from static desktops to mobile notebooks. The sales have risen from an estimated 62 million in 2005 to around 203 million in 2010. We expect the growth in notebooks and netbooks to continue, although at a slower pace, due to maturing of the notebook market. However, netbooks and tablets will continue to rule the PC market with newer technologies and rapid innovation in terms of product design and features.

The beginning of the last decade saw a consumer shift from desktops to notebooks. The increasing adoption of notebooks has resulted in a steady growth of the PC market though this was subdued somewhat during the economic crisis. We expect growth to resume as notebook growth should remain at moderate levels as notebooks have crossed the early growth phase of the product cycle and now starting to mature as an industry.

A majority of the growth in coming years will come from netbook sales as they gain increasing popularity worldwide, and rapid innovation and competition will make them cheaper and efficient.

Tablets, Cloud Offerings Should Drive Dell’s PC Share

Dell surpassed Acer to become the second largest PC sales vendor in Q4 2010 aided by strong emerging market sales realizing 4.2% YOY growth compared to Q4 2009. Dell is also expanding its presence in tablets and cloud offerings with plans to acquire cloud-service companies like Compellent Technologies, Insite One, and SecureWorks (See Should Dell Focus its Net Cash Position on Investment in Tablet Technology?). The company recently unveiled a 10-inch Windows 7 based tablet, one of the 39 new products showcased at the company’s “Dell Means Business” event in San Francisco. ^[1]

Trefis Community Forecast

Trefis members forecast for global notebook & netbook shipments will increase from 266 million in 2011 to 418 million by the end of the Trefis forecast period, compared to the baseline Trefis estimate of an increase from 259 million to 381 million during the same period. The member estimates imply an upside of just under 5% to the Trefis price estimate for Dell’s stock.

Our complete analysis for Dell’s stock is here.

1. Dell unveils 10-inch Windows 7 tablet, Feb 8, 2011 [↩]