More apathy for a Dell smartphone

Without seeing the device, industry observers remain underwhelmed by what Dell could bring to the mobile computing market.

It's hard to tell if anyone is as enthused about the possibilities of Dell making a smartphone as Michael Dell.

He's been making periodic references to his company making "small screen" devices in the near future at public appearances for the last year. But the people who watch his stock and analyze his company's every move, appear incredibly underwhelmed by the idea of a Dell handset. Their apathy is notable since a) Dell's last handheld device was very popular with consumers and b) Dell hasn't formally announced anything specific.

While getting into the smartphone-making business is not a terrible idea, seeing as how the PC market is pretty pitiful right now and smartphone sales are soaring, how Dell goes about manufacturing, selling, and marketing such a device is important. Even the slightest misstep could undo the progress the company has made in turning around its business.

Again, Dell has not made any official announcement of a specific product. But the frequency or rumors about such a device is increasing. The latest appraisal came Tuesday from Bernstein Research analyst Toni Sacconaghi Jr., who said that while there's potential for Dell to make some decent profits from a good handset--which could arrive "in the next six months"--he's not convinced Dell's execution will be all that graceful.

The company's track record in making devices other than PCs is "uninspiring," he wrote in a research note. "From an investment perspective, we do not believe it is appropriate to give Dell any credit (nor deduct any value) for its smartphone business. We'd rather take a wait-and-see approach."

In other words, Dell investors aren't ready to toast Michael Dell's smartphone just yet. There are plenty of reasons for them to be skeptical, chief among them being the company's ongoing restructuring and realignment of its core business . Sacconaghi points out that the smartphone business could be a "distraction" from the company's larger goal of improving its costs and establishing itself as a global PC brand and supplier of enterprise hardware and services.

But there's also the possibility that the phone will be just fine. Not a standout in its category along the lines of the iPhone, BlackBerry, or G1, but something that is based on brand name recognition could sell well in markets the company is targeting heavily right now: India and China. No matter what, it's really important for Dell to make decent margins. If it does manage to do that while snagging a small slice of the mobile handset market, something akin to what HTC has right now, it could result in decent revenue--Sacconaghi throws out the figure of $4.5 billion for fiscal year 2010.

There are rumors, however, that what Dell has come up with so far is not very exciting. Ashok Kumar, an analyst with Collins Stewart, panned the handset earlier this month --without seeing it, mind you--but based on feedback he heard from wireless carriers.

"The carriers, who see products from all the leading handset vendors, have decided to pass on Dell's handset," he said. "Some carriers are citing a noncompelling product with a road map that lags competition."

And a few weeks before that, Shaw Wu, an analyst at Kaufman Bros., also said in a research note that Dell showed devices running Android and Windows Mobile to carriers who were ultimately uninterested in the product.

Despite all the negative feedback on a product that isn't even official, it's actually not a terrible idea for the company to try this. Because, here's the thing: the PC industry isn't what it used to be . During the first quarter of 2009, the industry saw a 7.1 percent decline in shipments from a year ago, to 63.5 million units, according to IDC. Every major vendor is struggling to sell what are increasingly similar devices that bring in very thin profits. Though companies like Hewlett-Packard are making it look easy to sell laptops, most of the company's strength comes from its services and printing businesses. So Dell getting into advanced handsets that offer Web access, e-mail, and GPS features, one of the faster growing consumer electronics categories--IDC says sales climbed 22.5 percent over the previous year at the end of 2008--could be, well, smart.

If it is trying to compete with the likes of Apple, Nokia, RIM, Palm, or even HTC, timing is key. By the time Dell releases this thing, whatever it may be, to make a decent impact in markets like the U.S., Japan, South Korea, and Europe, it would need to be a significant jump forward in what those guys are offering. Consumers aren't dumb and they're not just going to buy something because there's a Dell sticker on it, especially if it really is as far behind what's currently on the market as some are saying.

So what would would make you buy a Dell smartphone? Make sure to take our poll or let us know in the comments.

About the author

Erica Ogg is a CNET News reporter who covers Apple, HP, Dell, and other PC makers, as well as the consumer electronics industry. She's also one of the hosts of CNET News' Daily Podcast. In her non-work life, she's a history geek, a loyal Dodgers fan, and a mac-and-cheese connoisseur.

 

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