Dell's Mobile Phone Dreams: An Uphill Battle

Word that Dell is getting into the mobile device game, possibly with a smartphone offering, are nothing new, as a Dell smartphone has been a topic of speculation for months. But it appears this time Dell is taking the plunge. Dell spokespeople have confirmed in several publications that Dell and China Mobile are working together and this week showed off prototypes of Dell devices.

Though early details off Dell's mobile devices are few and far between, rumors indicate Dell has built the Mini 3i smartphone, a 3.5-inch touch-screen device that runs on the 2G GSM network and features Bluetooth connectivity and a 3.2 megapixel camera.

And while Dell is looking to mobile devices and smartphones in a bid to off-set slowing computer sales, industry analysts say that Dell is too late to the smartphone party to make any major dent in market share owned by the likes of Research In Motion (RIM) Ltd.'s BlackBerry line, the Apple iPhone and a host of others.

"Dell's entry into the smartphone category has largely been anticipated," UBG AG analyst Maynard Um wrote in a report, according to Bloomberg. Um added that he gives Dell a "neutral" rating, noting that Dell is getting into a crowded space, which will put pressure on prices and profit margins for a Dell smartphone. Dell faces an uphill climb to succeed in the smartphone world.

Still, Dell sees a big opportunity. A report from Gartner Inc. last week indicated that smartphone sales rose 27 percent in the second quarter compared to the same quarter in 2008, essentially saving the mobile phone industry, which is struggling in nearly every other segment.

Dell has confirmed that it has teamed with China Mobile to build mobile devices, the company is keeping additional details close to the vest, leaving industry watchers to rely on speculation. Dell maintained this week that no products were unveiled or launched and that China Mobile was only showing a prototype.

The rumors that Dell is building its own smartphone swirled in earnest in March, when CEO Michael Dell said his company may eventually make and sell small form-factor mobile devices with features similar to smartphones. Adding more fuel to the fire was Dell tapping the former head of Motorola's mobile-device division, Ron Garriques, to run its consumer business in 2007.