A Dell Smartphone Would Face Big Hurdles

Dell might want to introduce a different kind of handheld known as a mobile Internet device, or MID. These machines are larger and more powerful than smartphones, yet they're far smaller and of lighter weight than even the tiniest notebook computers known as netbooks. Consumers are amenable to using MIDs in place of smartphones.

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Dell CEO Michael Dell has done little to dispel rumors that his company is working on a mobile computing device. In fact, he all but confirmed them while traveling in Japan on Mar. 24 when he said: "It is true that we are exploring smaller-screen devices." What form those devices will take remains a matter of heated debate. Talk is that Dell plans a smartphone that would compete with Research In Motion's BlackBerry, Apple's iPhone, and the various devices running software from Microsoft , Nokia, or the Google-backed Open Handset Alliance. Prototypes of a Dell-made smartphone are being circulated in the wild and, according to Kaufman Bros. analyst Shaw Wu, got a cool reception from mobile-phone carriers including AT&T and Sprint Nextel. Dell has tried its hand at smartphones before, with little success. The company discontinued its Axim personal digital assistant in 2007 following several years of lukewarm sales. "They didn't have a particularly exciting portfolio," says Neil Mawston, director for wireless device strategies at consultant Strategy Analytics. Carriers that reviewed its most recent effort saw little to set Dell apart from the competition, Wu says. "There's some interest, but not a whole lot," he says. Meantime the market is growing crowded. Rival PC makers such as Acer, Asus, and Lenovo have all jumped into the smartphone market. Palm is about to release a much anticipated device, the Palm Pre. Apple is expected to unveil a dramatic hardware upgrade to its iPhone this summer. "Trying to sell into that sort of publicity could be a little bit of a problem" for Dell, says Will Stofega, program manager at IDC. A Jammed Smartphone Market Maybe now is not such a good time to launch a smartphone. Instead, Dell might want to introduce a different kind of handheld known as a mobile Internet device, or MID. These machines are larger and more powerful than smartphones, yet they're far smaller and of lighter weight than even the tiniest notebook computers known as netbooks. Consumers are amenable to using MIDs in place of smartphones, according to a recent survey by consultant ABI Research. The category is just emerging, so less competition would allow Dell to stake ground early. Companies such as Dell "will find a much easier time entering the [market for] 4- to 8-inch-screen devices," says John Bruggeman, chief marketing officer of Wind River Systems, which helps companies match hardware and software for handsets and MIDs. In contrast, even existing cell-phone makers, including Motorola and Sony Ericsson, are struggling in the smartphone market. "The incumbents are entrenched, it's difficult to break in," says Ashok Kuman, an analyst with Collins Stewart.