Military Use Gives Dell’s Tablets New Life as PC Market Share Slips

by Trefis Team
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Dell Inc. (NYSE:DELL), the third largest PC vendor in the world, hasn’t really been able to capitalize on the rapidly growing mobile market with its Android and Windows based devices failing to strike a cord with customers. However, last week brought Dell’s mobile ambitions some good news as its Android-based Streak 5 tablet received approval from the Department of Defense (DoD) for use on its secure networks. [1] Dell is currently a very small player in the mobile market dominated by players like Apple Inc. (NASDAQ:AAPL), Nokia (NYSE:NOK), Samsung and Research in Motion (NASDAQ:RIMM).

Our Trefis price estimate for Dell stands at $21, which is about 30% above the market price.

See our full analysis on Dell

Dell Aims to Capture Public Sector and Defense Mobile Market

Dell’s Streak 5 tablet was found to be a good fit for military use with its Mobile Security for Android platform – developed in partnership with Good Technologies – and certified for use within the U.S. Department of Defense by the Defense Information Systems Agency (DISA). This tablet was previously discontinued for commercial use. The certification by DISA will allow the next wave of Dell Android devices, set for release next year, to be rapidly integrated into military environments boosting Dell’s revenues as well as supporting its mobile devices business.

Admitting that the consumer tablet market “is an iPad market,” [2] Dell now expects to make up for the lost consumer market opportunity by targeting the military and public sectors where mobile devices are witnessing uncharacteristically rapid adoption and are moving quickly through government red tape.

Don’t Count out PCs Yet

While already struggling in the mobile market, things haven’t been great for Dell on the PC front. Dell’s PC shipments declined 1.6% during the third quarter and its global market share dropped 60 basis points to 12%. [3]

While many believe that the PC market growth will soon wither away and die at the hands of new mobile computing devices, recent numbers from research firms IDC and Gartner as well as Lenovo’s recent second quarter earnings indicated otherwise. [4] Though global PC shipments expanded only by over 3% during the third quarter of 2011, Lenovo’s shipments jumped a whopping 36% according to IDC, leaping past Dell to second place with over 13% market share globally. This indicates that there is still opportunity for growth in the PC market for those that innovate and target the right markets.

Over the past few years, Dell has quickly transformed into a software and services organization with a focus on enterprises.  However, it seems that PCs – which make up nearly 18% of our $20.75 Trefis price estimate for Dell – still have much to offer given their demand in developing countries.

Understand How a Company’s Products Impact its Stock Price at Trefis

  1. Dell Mobile Security for Android Officially Certified for Government Use by DISA, Dell []
  2. Michael Dell: The Tablet Market “Is An iPad Market,” Android Doesn’t Compete, businessinsider,com []
  3. IDC and Gartner: Lenovo leaps past Dell for second place, still trails HP for the gold, []
  4. Lenovo Group 2Q Net Up 88%; Beats Forecasts, []
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