Will Dell’s Low Cost Windows 8 Tablet Revive Its Tablet Business?

DELL: Dell logo

Dell, (NASDAQ:DELL) recently announced a new low cost Windows 8 tablet called Latitude 10 Essentials, which is price at $499 for the 32 GB version and $579 for the 64 GB version. Running on Windows 8 operating system, these tablets are aimed to be productivity tools. This is Dell’s second product in the competitive tablet market after its first attempt with the Dell Streak line of tablets failed to take off.

The Latitude 10 Essentials is a stripped down version of Dell Latitude tablets announced in October last year, and have lower hardware and software specifications as it tries to maintain a lower price point. The Latitude 10 is priced at $650 and runs 32 bit Windows 8 Pro, but is still competitively priced compared to other offerings such as Windows Surface, which starts at $899 for the Windows 8 pro version. This attempt by Dell to price a productivity tool at the price of a tablet running Windows RT may help it gain market share in the tablet market. [1]

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Market Opportunity For Dell

We estimate that the global tablet market size this year in terms of units sold is around the 150 million unit range and worth about $5.5-$6 billion, and Dell owns less than 0.5% of this market. With the company focusing on services, even its PC market share has dropped to the 10%-12% range, as the PC market is highly commoditized and has low margins. However, the tablet market is still a relatively high margin business and considering its growth rate, it presents a very big opportunity for Dell. We expect the company to have revenues of about of $50 billion in 2013, down from nearly $60 billion last year, primarily due to the shrinking PC business. The tablet market may be a way to stop this decline.

We currently forecast Dell’s tablet business to be an insignificant part of its valuation, contributing to only about 1% of its stock price. We will keep a close eye on its tablet business as it can result in an upside of more than 5% to its current Trefis price estimate, if the company manages to capture even 2%-3% of the global tablet market by the end of our forecast period.

We currently have a $12 Trefis price estimate for Dell, which is nearly 20% above the current market price.

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  1. Dell Latitude 10 Essentials, www.engadget.com, Jan 8, 2012 []