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Will Dell make a successful foray into the smartphone market? Or is’t just a distant dream for the American?

Dell is rumoured to be planning an annoucement of its smartphones at the upcoming GSMA Mobile World Congress in Barcelona to offset slumping sales of personal computers. As per market reports, Dell plans to introduce smartphones that can compete with Apple’s hugely popular iPhone and RIM’s Blackberry. As per a report in WSJ, the phone will in all probability be based on Google’s Android OS and Microsoft’s Windows Mobile software. It is said that the Round Rock, Texas-based computer manufacturer, which is the second-largest producer of PCs in the world, has been designing the prototypes for quite sometime now. It is also being widely speculated that Dell has set up a core team for the same purpose at Chicago. The team is said to have been working on a top-secret smartphone project for the last year. This release of the cell phone would also work well for Dell, especially considering its year 2007 acquisition of Zing Systems, that could allow it to grant its users facilities of music streaming across its devices, for some price of course!

One question however remains: can Dell establish a position on the smartphones platform that can compete with the smartphones of Apple, RIM, Palm and others? Given the cool down in Dell’s core PC and server business in the face of the current donwturn, there is no doubt that the given launch can help it tap newer markets. But many analysts also don’t agree to this. As per them, in the face of a formidable competition from Apple, RIM, and the forthcoming Palm Pre success in the smartphone market is easier said than done. “There is a $3 billion opportunity for smartphones, but at present smartphones have a very small fraction of that. This means that the market at present is far from settled, thereby allowing new entries to more easily prosper,” avers Rob Enderle, Principal Analyst, Enderle Group. “Smartphones market has grown at a tremendous 30-40% (annually) over the past few years, and is expected to grow in the future as well,” adds Shushmul Maheshwari, CEO, RNCOS. The happy news is that today, everyone wants to move up the value chain and therefore own a smartphone. “If successful, Dell is likely to get a great piece of this significantly rising demand,” says Maheshwari.

Then there are many experts who foresee a bright prospect for Dell’s smartphone. Dell is well known for its online retailing, and if leveraged well, it could make its smartphone a compelling device. On the other hand, if Dell’s product is successful in gaining attention of end-customers, it will definitely have an adverse impact on other smartphone manufacturers. This would cause a reshuffling in the current market landscape, with Dell finding space in the market which is currently dominated by players such as RIM, Nokia, HTC, and Apple. Realistically however, it will take it some time to create a dent in the market.

Thankfully, analysts do not find anything wrong in Dell’s decision to enter the smartphone market, though it also depends on the final execution of design. “The iPhone could have been disastrous for Apple but they executed it so well that it is now one of their greatest assets. If Dell can execute it similar to how Apple did, this will prove to be very successful for it.” Wonder, if the day will ever come when Dell will have to choose over which product line to drop; but if at all, that will only be likely in the next recession, another decade later!

Arun Kumar Roy

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Source : IIPM Editorial, 2009

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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