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Apple Isn't Threat in Notebook Business

Apple will have difficulties dislodging HP and Dell from their hold in the enterprise business PC sector.
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(AAPL) - Get Apple Inc. Report

is primarily a consumer-oriented company with little presence in the enterprise PC sector, where computer makers like


(DELL) - Get Dell Technologies Inc Class C Report



(HPQ) - Get HP Inc. Report

and Lenovo dominate the business notebook market.

Notebooks constitute about 17% of our price estimate for Dell's stock, 12% for HP's stock and 8% for Apple's stock.

A recent

IT Business Edge blog

, taking cues from Frost & Sullivan's


on brand preferences of C-level executives, or CXOs, emphasized that Apple Macs are beginning to gain mind share amongst enterprise executives.

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By slowly winning over the top executives, Apple may be able to emulate

Research In Motion's


BlackBerry adoption strategy which began with C-level business executives and trickled down into widespread business usage. If successful, such a strategy can be a threat to companies like HP and Dell that sell many of the notebook PCs used in businesses today.

We believe that such a scenario is unlikely and that Dell and HP are under no threat from Apple's entry into the enterprise notebook sector. Below we explain the significance of Apple's notebook business, and how Apple may not be able to easily overcome the main advantages of Dell and HP: distribution, lower pricing and managed services.

Mac Notebooks are 8% of Apple's Stock

We estimate that Apple's Mac notebook business constitutes about

8% of the $267 Trefis price estimate for Apple's stock

. Apple has only about

5% share

in the global notebook market compared to HP and Dell which have market share of




, respectively.

The wider use of Dell and HP notebooks among consumers and enterprises are attributable to a combination of demand for Windows-based PCs, pricing and distribution. You can modify our HP, Dell and Apple notebook market share forecasts below to see how changes in market share would impact the stocks of each of these companies.

Three Notebook Hurdles

Besides the challenge of overcoming the widespread usage of Windows and Windows-based products by businesses, Apple faces three key hurdles for wider business adoption:

1. Dell and HP have a strong business distribution channels and widespread adoption.

HP and Dell have dedicated distribution channels for business clients and spend significant resources maintaining relationships with businesses. Apple, which has been primarily consumer focused to date, will have to build an equivalent sales structure to compete with Dell and HP, and that could take many years.

2. Mac's higher pricing limits its appeal

We estimate that the

average price for Mac notebooks

sold in 2009 was $1,300 in comparison to

$860 for Dell notebooks


$670 for HP notebooks

. Apple is known for its premium pricing and is unlikely to lower prices drastically which may make companies opt for cheaper options.

3. HP and Dell offer additional services along with hardware

Enterprises are more likely to choose vendors that can help them reduce the total cost of ownership and maintenance of PC infrastructure. HP and Dell score over Apple here with their broad range of additional offerings such as network storage, servers and managed services that Apple lacks.

You can modify our Apple market share forecast above to see how, despite these hurdles, what higher notebook market share could mean for Apple's stock as well as the stocks of its competitors HP and Dell.

For additional forecasts and analysis, here are our complete models for the stocks of








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