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Dell to pitch $199 handheld at Comdex

The PC maker plans to jump in with two new Pocket PC-based handhelds this fall. Analysts say Dell's entry should set rivals shivering. Is a price war ahead?

Dell Computer is planning to unveil two handhelds--one priced at $199--based on Microsoft's Pocket PC 2002 operating system this fall, according to sources.

Both handhelds are expected to be put on display at the Comdex Fall 2002 tradeshow in November, sources said. One handheld, which will incorporate a 300MHz Intel XScale processor, will sell for $199. The other handheld will include a 400MHz Intel XScale processor and sell for $299.

Separately, an internal Dell document found on the Internet described two similar devices, but didn't mention the devices' cost. Dell spokesman Jess Blackburn confirmed that the documents were from the company, yet cautioned that the specifications may not be final. He would not comment on pricing.

Dell has said previously it plans to enter the handheld market. Blackburn said the company has committed to launching a handheld in the fourth quarter.

"That is still our plan," he said.

Priced at $199 and $299, the new handhelds set a new pricing standard for devices using Microsoft's Pocket PC 2002 operating system. Other device makers have recently shown interest in lowering prices for such handhelds, and for good reason; some popular Pocket PC-based devices can sell for more than $600.

Dell's inexpensive device may prove to be a mixed blessing for the handheld market, according Bill Crawford, an analyst with investment bank U.S. Bancorp Piper Jaffray.

"Dell's involvement is an endorsement of the market and could expand the market, but Dell is known for driving the margin out of the business," said Crawford. "They're going to try to commoditize this space."

In the past, device makers have seen profit margins as large as hundreds of dollars per Pocket PC-based handheld; however, several companies appear willing to take lower margins to help grow the market. Falling component costs have also made price cuts more palatable for manufacturers.

"When we got into software for handhelds, we made a bet that component costs would come down, and while it was initially an obstacle, we're now able to attack the low and mid-level price ranges," Microsoft spokesman Ed Suwanjindar said last month.

Hewlett Packard has said that it will be aiming for the mid-range market with at least one new device for the holiday shopping season. ViewSonic recently announced that it will offer a $299 device Nov. 1.