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In recent years,




stock price has shrunk considerably and is now around half of its $30 level in 2007 at $14 today.

This is due to a slowdown in tech spending, company specific issues and greater competition from competitors like






and, more recently, Acer and Toshiba. Surprisingly, our current estimates show that Managed Services and Consulting account for 20% and cash 15% of Dell's company value.

We wanted to explore what scenarios could help Dell regain the $30 level by looking specifically at its traditional notebook and desktop businesses. The key drivers to these businesses are pricing, market share and profit margins (measured by EBITDA).

By looking at scenarios with our modifiable charts, we estimate that the notebook unit could add around $8.00 and the desktop unit could chip in another $4.00 to our current prices estimate of $18.38 for Dell's stock, which is about 30% percent above its current market price.

Notebook Segment

Notebooks and netbooks sales make up 16% of the Trefis price estimate for Dell compared to under 4% for its desktop unit. For the notebook business we currently forecast that average prices will decline by over 50% from $828 in 2010 to $398 in 2016 due to cheaper notebooks and netbooks being sold in emerging markets. If Dell can maintain a drop of around 25% to $600 instead, similar to the drop in prices between 2006 and 2009, this makes up about 40% of the price increase.

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By extension better pricing should translate to improved profit margins estimates, and if we estimate a modest improvement in blended EBITDA margin (Dell does not break out its margins by notebooks and desktops) of 7% by 2016 between its notebook and desktop businesses versus remaining at 5% as we currently expect, then we are almost to our $8.00 improvement.

Finally, we assume that notebook market share grows to 17% by 2016 from our current estimates of 14% in 2010 with gradual declines thereafter. These combined actions add $8.00 to the stock price estimate.

Desktop Segment

Dell's desktop business has struggled in recent years in part due to a slowdown in corporate spending. We wrote earlier this week that the corporate PC refresh cycle has begun in earnest according to



management. If corporate IT budgets indeed pick up meaningfully, Dell could be a leading beneficiary.

Our current estimates forecast desktop prices to drop dramatically to around $200 by 2016 from current levels of $630. If desktop prices drop by about half of this amount to $400 by 2016, the desktop business receives a small boost.

Then Dell simply needs to maintain current market share levels of around 16% versus our estimated declined to 12% by 2013, and once we factor in the better blended notebook and desktop profit margin of 7% mentioned above, the desktop unit adds $4.00 to our price estimate.

You can see the complete $18.38 for Dell's stock



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