Markets

Tablets to Help Push Dell Stock Above $20

Dell ( DELL ) has now entered the tablet race with the launch of the Streak 7 this month. According to IDC, the tablet market is expected to grow from around 45 million in 2011 to 71 million in 2012, with players like Apple ( AAPL ), Research in Motion ( RIMM ), Samsung, Motorola Mobility ( MMI ) and LG all launching tablets and expected to be the major companies in this market.

We estimate that tablets will contribute about 6% to Dell's stock value; however, if Dell can create more success with tablets than our forecast, there could be upside to the $20.84 Trefis price estimate for Dell's stock , which is significantly above the current market price.

Dell to Capture 5% Share of Android Based Tablets in 2011

The Streak 7 is a tablet device with a 7 inch screen based on Google's Android 2.2 operating system. The Dell Streak 7 has been launched at a crucial point as Android based tablets become increasingly popular and are gaining market share from the tablet market leader in Apple's iPad.

In Q4 2010, sales for Android based tablets increased significantly to 22% of global tablet shipments, up from just 2.3% in Q3 2010, with the launch of Samsung's Galaxy Tab. Given the rapid adoption of Android based tablets so far, Dell's two different Android based tablets puts it in a prime position to win market share.

However, the fact that Streak 7 is based on Android 2.2, some users might hold out for Android's newest version 3.0 called Honeycomb, which is specifically designed by Google for tablets.

We estimate that Dell will be able to capture a modest 5% market share of Android based tablets in 2011 behind competitors like Samsung and Motorola selling close to 700,000 units during the year. However, as the Android tablet market grows, we believe Dell will be able to at least hold on to its share, if not grow it using its innovative technologies and new products as well as sales capabilities. We estimate Dell's tablet sales will continue to grow at the same rate as the Android based tablet market reaching 5 million units by the end of our forecast period.

However, there could be an upside of around 8% to our estimate for Dell's stock if the tablet unit sales increase at a much faster rate to reach 8 million by the end of the Trefis forecast period.

Dell's Tablet Pricing Could Decline

Dell's Streak 7 at $450 is priced at the lower end of the tablet market. However with the Streak 10 expected to launch soon, we expect the average pricing of Dell's tablet will increase in 2011. Dell Streak 10 will be a 10 inch tablet device, and we estimate it will be priced at the high end of the tablet market around $700-$800. As a result, we believe the average tablet pricing should be around $550 for Dell in 2011. Increasing competition in future could force Dell to reduce tablets pricing beyond our current forecast of around $410 by the end of Trefis forecast period.

However, if Dell is able to control its pricing declines, and if the tablets pricing declines slowly to reach around $500 by the end of Trefis forecast period, there could be additional upside to our estimate for Dell stock.

You can drag the trend lines above to see the impact of various tablet unit sales and tablet pricing scenarios on Dell's stock.

See our analysis of the $20.84 Trefis Price estimate for Dell's stock.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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