The resurgence of the PC market is an opportunity for chip makers such as Intel (NASDAQ:INTC) and PC manufacturers such as HP (NYSE:HPQ) and Dell (NASDAQ:DELL). Gartner, a market research firm, indicated in a recent press release that global notebook and netbook shipments increased more than 43% during the first quarter of 2010 compared to 2009.
Gartner now expects worldwide PC shipments (desktops, notebooks and netbooks) to grow at 22% in 2010, up from a previous projected growth rate of 20%.
Below we discuss the reasons leading to strong growth of notebook and netbook shipments, and how much additional upside there could be for the stocks of Intel, HP and Dell if the growth momentum were to continue.
Growing shipments of notebooks and netbooks
The strong growth of more than 43% in notebook and netbook shipments is attributable to:
1. Success of the Windows 7 Platform
Microsoft’s Windows operating system has about 75% market share among PCs shipped globally. Windows 7 has resolved some of the issues related to Windows Vista and is seeing fast adoption by consumer and businesses alike. We believe that the success of Windows 7 will drive PC sales.
2. Ongoing Corporate Refresh Cycle
Businesses have now started changing their fleet of PCs since they had previously limited their spending in recent years due to the weak economy. This upgrade cycle will drive strong unit sales and also feature higher average selling prices. Gartner expects the momentum of the corporate PC refresh cycle to continue till 2011.
Trefis estimates the global notebook and netbook shipments to be around 157 million units in 2010 implying a 5% growth over 2009 levels. However, with strong demand seen among consumers and enterprises in the first quarter, the growth in shipments may be anywhere between 20% (30 million units) to 30% (45 million units).
Upside of 10% to Intel’s Stock
Intel dominates the notebook and netbook processor market with around 80% share through its Core and Atom series. You can modify the forecast below for global notebook and netbook shipments to see that a 20% to 30% growth in shipments over 2009 level results in 6% to 10% upside to the $23 Trefis price estimate for Intel’s stock.
Small Upside to Stocks of HP & Dell
You can modify the forecast below for global notebook and netbook shipments to see that a 20% to 30% growth in shipments over 2009 level results in about 2% upside to the $54 Trefis price estimate for HP’s stock. Similarly, the positive impact on Dell’s stock of higher global notebook and netbook shipments is estimated to be about 2%.