Tuesday, April 14, 2009

Will Dell Smartphone Turn Out To Be A Flop?

. Tuesday, April 14, 2009

By stockOzone team

Though it has not officially confirmed the launch of a mobile phone, the second largest computer maker Dell Inc. (NASDAQ: DELL) has dropped enough hints about an upcoming smartphone. However, it appears that the Dell phone doesn't have many takers. Experts point out that the smartphone being developed by Dell may very well turn out be a dud.

According to sources, carriers have not much shown interest in Dell's smartphone and the company may very well enter the mobile phone market by selling its phone direct through retailers. "The carriers, who see products from all the leading handset vendors, have decided to pass on Dell's handset," Collins Stewart analyst Ashok Kumar said on Tuesday. "Some carriers are citing a noncompelling product with a road map that lags competition."

Kumar has some harsh words reserved for Dell's smartphone strategy.He says that the company is “facing a stacked deck with little experience on how to play this game.” “Consumers are used to subsidized handsets and are not used to paying full price,” he wrote. He added "Dell committed itself to the handset business with a poorly-planned feature set and cost targets," saying further that RIM, Apple and Nokia "each has a stronger roadmap and a customer footprint".The Dell project is “likely to go down in flames,” Kumar concluded.

Earlier it was reported that Dell shopped the phone around to providers last month at the Mobile World Congress, but was unsuccessful. It is being said that Dell's prototype was rejected by carriers as too dull compared to products of other US rivals. The reports suggest that the company even twice made changes to the original model, but even the new prototype failed to generate much enthusiam amongst carriers.

Not many analysts are optmistic about Dell's smartphone. The smartphone is already too crowded and it would be difficult for the company to challenge Nokia's domination or match Apple's expansion. Gartner analyst Ken Dulaney says that a smartphone would be "one of the riskiest moves Dell has ever made." He continued "If they don't have something that's spectacular, then it's going to be a problem." Kaufman Bros analyst Shaw Wu is of the same opinion.

Yet another threat to Dell's smartphone ambition is Palm's (NASDAQ: PALM) release of its much anticipated Pre handset. The smartphone has generated enough excitement and may dim Dell's prospects. Few analysts have even suggested that instead of launching its own smartphone, Dell should acquire Palm in order to enter the market which is growing at a remarkable pace.

Disclosure: Author does not own any of the stocks discussed here.

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Anonymous said...

Dell smartphone will not be able to match Apple or RIM's might. period.

Anonymous said...

I think Mr. Kumar is underestimating Dell's strength on the enterprise side of the smartphone market. This is where Dell's key strategic relationships exist and where their key market segment focus lies.

This segment operates on a completely different model than the consumer subsidized model. They DO pay higher prices for handsets (which can be bundled btw with a server, PC deals) then these companies cut a separate deal with a carrier for service...at a lower unsubsidized rate than what a typical consumer would pay.

Dell proved it could be successful in selling handhelds to companies with their Axim line....which is still noted by many companies and techies as the killer PDA that everyone said Dell couldn't build because of its' lack of R&D and Software investments. A phone implementation is not much different than a wireless PDA implementation other than a lengthy carrier qualification.

True the Dell phone might not be match an Iphone...but that's a separate consumer market altogether....with a lot more type than tech (look at iphones competitive performance metrics and return rates).

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