Dell could join Acer in unveiling smart phone

Rumors of Dell entry grow on eve of GSMA Mobile World Congress

When Dell Inc. stopped selling the Axim PDA in 2007, several industry observers predicted that the PC and server maker would eventually move on to sell smart phones.

The rumors that Dell would enter the smart phone business have persisted since then and have even gained heat with the approach of the GSMA Mobile World Congress in Barcelona next month, historically a popular venue for vendors to unveil new mobile phones.

For example, Acer Inc. has confirmed online that it plans to launch new smart phones at the show. Acer officials have not commented on the plan beyond the statement posted on the company's exhibitor page on the Mobile World Congress Web site.

Several analysts have looked for Dell to enter the smart phone business because of its background in handhelds and because of its 2007 hiring of Ron Garriques, who had been the head of phone development at Motorola Inc.

Garriques was hired to head up all consumer product development at Dell, and had to sign a noncompete agreement that would prevent him from working on any phone until February 2009, noted Kevin Burden, an analyst at ABI Research Inc. in New York. "That deadline for Garriques is fast approaching," Burden said in an interview. "We all knew Dell would get into smart phones at some point."

But Burden said that Dell could go all the way to the brink of announcing a smart phone and then pull back if the economics are not right. The same thing happened with the Axim PDA, he noted, citing the firm's decision to postpone its launch from 2000 until 2002. Burden said he had first-hand knowledge of that decision, having worked as a consultant to many manufacturers, including Dell, at the time.

"Dell has never been first to market with anything," Burden noted. "They sit back and look to see when the market has sustainable volumes and squeeze ... to get prices down."

Andy Kitson, an analyst and blogger at Juniper Research Ltd., said Dell might balk at the cost of designing and developing a smart phone. The Wall Street Journal reported, based on information gathered from unnamed sources, that Dell has already created two smart phone prototypes running the Windows Mobile and Android operating systems.

Independent wireless and telecom analyst Jeffrey Kagan said Acer's announced plans and the rumors of Dell's entry into the smart phone market come at a good time. "The market is lousy compared to great times, but for smart phones, the market is still decent," he said.

Burden said that successful forays into the smart phone business against the likes of Apple Inc. with the iPhone and Research In Motion Ltd., maker of various BlackBerry devices, would depend in large part on which carriers end up selling the devices in the U.S. When asked which carriers are likely to sell Dell or Acer smart phones, Burden said "who knows? Selling mobile phones is lot different than selling PCs directly as Dell has done, and the only effective way is through a mobile agreement with an operator to get good volumes of sales."

But Burden agreed with Kagan that smart phones are one of the few products expected to grow in sales in 2009, meaning manufacturers of all types of computers and handsets will try to sell them. He noted that ABI projects that smart phones will make up 17% of mobile device sales in 2009, up from 14% last year. The total number of mobile devices sold in 2009 will be 2.5% less than last year, ABI added.

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