Dell Likely to Enter the Mobile Smartphone Business

By Jessica Davis  |  Print this article Print

Dell is likely to introduce a smartphone in the next six months, going up against established devices such as Apple's iPhone, Google's Android-based phone from T-Mobile and RIM's BlackBerry.

Dell is likely to introduce a smartphone device in the next six months, attracted to the form factor by high margins, falling sales of laptop and desktop computers, and the potential of mobile Internet devices.

That prediction from Bernstein Research is no surprise, given Gartner’s bleak assessment for PC sales in 2009, showing them declining nearly 12 percent. And while Dell faces many disadvantages against established players in the smartphone market, the benefits could be substantial.

Dell has publicly stated that it is working on "smaller-screen devices," according to analyst firm Bernstein Research, in a brief report addressing the question of whether Dell will enter the smartphone market.

"Given the sheer size of the smartphone market, even a modest success could add meaningfully to Dell’s revenues," says Toni Sacconaghi, senior analyst at Bernstein, in his brief report.

Dell’s advantages may have more to do with its existing business models than its technological know-how, according to Bernstein.

"Where Dell may have an advantage, in our view, is in distribution," he says. "If one believes the smartphone will eventually become commoditized—to the point where consumers are comfortable purchasing their smartphones based solely on a set of technical specifications—then Dell may be able to create significant value through direct distribution. Moreover, we believe that this model could be effective with enterprise sales."

Bernstein acknowledges that this is a big change from the current distribution model for smartphones. That’s why direct distribution may be a stronger play for enterprise customers, the firm says.

The firm also believes it's unlikely for Dell to enter the mobile phone space with anything but a smartphone.

"We also do not believe it makes sense for Dell to start its own wireless data service via a resell arrangement with carriers," says Sacconaghi. "Unless Dell has some proprietary content or service to offer, we do not believe there is incremental value to be captured by owning the wireless service relationship."

The biggest risks to Dell entering the smartphone space are most likely to come from Dell making too big of an investment in the initiative or from a collapse of the high margins that exist today for smartphones.

"We note that Dell’s previous foray into adjacent consumer electronics categories—from televisions to PDAs to MP3 players—has not been successful," says Sacconaghi.

Jessica Davis covers the channel for eWeek and Channel Insider. Her technology journalism career began well before anyone heard of the World Wide Web and has included stints at Infoworld, Electronic News/EDN, and the Philadelphia Business Journal. Her work has also appeared on CNN and Forbes.com. She has covered hardware, software and networking, as well as the business side of technology. She has won several journalism awards, including a national ASBPE award for best staff-written column, and was named Marketing Computers hardest working tech journalist on their inaugural list of top tech journalists. Jessica can be reached at jessica.davis@ziffdavisenterprise.com

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