Dell may try its hand at handhelds

A new report from market researcher ARS speculates that the PC giant is getting ready to place an order with a contract manufacturer in Taiwan. The report says Dell's systems will likely be based on Microsoft's Pocket PC software.

Cody Pinkston, a spokesman for Dell's client products group, said the company doesn't comment on rumors or unannounced products. However, he acknowledged that Dell is "always looking at emerging technology and business opportunities," although there was "no specific team" looking at the handheld market.

Dell has not shown much interest in the market for handhelds, in part because those devices are usually sold through retail channels, where the company doesn't have a presence. The ARS report speculates that Dell might have reversed itself to try to push further into the corporate market, where handhelds are quickly becoming as ubiquitous as notebooks for traveling office workers.

Sources close to Dell told CNET News.com that although no decisions have been made, the company has been evaluating communicator-style handheld devices that combine the features of cellular phones and personal digital assistants (PDAs), in the manner of Handspring's Treo.

Communicator-style devices, available from several companies, are considered to be the future of the PDA market. They are typically priced at the high end of that market, at around $500 to $600, though Dell would probably try to undercut its competitors.

Dell currently resells Palm OS-based handhelds from Sony, Palm and Handspring, and it resells Pocket PC-based devices from Casio, NEC and Hewlett-Packard. ARS says the Palm licensees, which largely target the consumer market, would not be the focus of Dell's competitive energies.

In going after corporate buyers, the company would be going up against a well-established player.

"HP/Compaq will be Dell's primary target," the ARS report says, "as a Dell PDA will aim to compete with the iPaq, which has been a huge success in the handhelds industry."

On Monday, HP plans to announce two new iPaqs, the first products under that name since HP completed its merger with iPaq maker Compaq Computer. Dell will also be on the lookout for Toshiba, ARS said. The Japanese company's new e740 Pocket PC-based device incorporates Wi-Fi wireless capabilities.

"As wireless connectivity between handheld devices and corporate networks/servers continues to grow out of the infancy stage, Dell must be prepared (as HP is today) with a branded device," the ARS report said.

In January, Dell's chief financial officer revealed that the company had briefly formed a group to study the handheld sector, although he said the group was eliminated in 2001.

"We had a small business group that looked at it. At the time, we weren't convinced there was a big enough profit pool in it," CFO James Schneider said at a conference.

"Profit pool" is a concept Dell uses to size up a new market. If the available revenue is considered large enough, Dell often partners with a third party to enter the market swiftly. It has taken that sort of action recently in network switches and digital projectors.

In keeping with its overall strategy, Dell would likely get into handhelds with a lower-priced offering than its competitors in an effort to quickly gain market share. It launched its projectors, for example, at $2,500, at least $500 less than rival products.

News.com's John Spooner contributed to this report.