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Handoff: Why Dell Needs to Buy Palm Now

Michael Dell, eponymous CEO, gave some strong hints today during a speech in Japan that his company would be getting into the smartphone game. His words come hard on the heels of recent rumors that Dell cellphone prototypes had been making the rounds of the U.S. wireless carriers' offices. 

But those rumors were of an entirely unflattering nature. Apparently the smartphone devices Dell had been touting were roundly rejected not because they weren't good hardware but because they were too dull, or even "too Dell." The reception was apparently so harsh that Dell was reported to have retracted its models and returned to the lab for a total rethink.

Which makes Michael Dell's words interesting. Specifically he said: "It is true that we are exploring smaller screen devices...We don't have any announcements to share today but stay tuned as when we have new news we will share that with you." He also hinted that the company's watching the "ecosystems" that have grown around smartphones—specifically a reference to the iTunes App Store and the Android applications marketplace.

That, of course, may be what Dell is interested in. Selling a cellphone with an attendant app store is an excellent way of creating a new revenue stream via a share of income from newly developed apps in the applications store. But that would require Dell to have its own app store, and that's the first problem with the plan. In the existing models from Google and Apple—and emerging ones from Palm and Nokia—the revenue share goes to the owner of the smartphone's operating system.

Is Dell likely to develop its own smartphone OS? Pretty unlikely. It'd be far simpler to go with Windows Mobile or hop on the Android bandwagon. So then Dell would be in the position of selling a generic smart cellphone running a generic OS, and then trying to earn revenue from a dedicated app store. Good luck with that.

And the second problem is revealed there too: Dell's generic smartphone. Clearly the smartphone market is taking off, and any company that makes electronic gadgets would like to get in on the party. But the rumors that Dell's prototype cellphones were uninspired chime nicely with Dell's problem in the computer market: it's just another vanilla PC maker. Even its latest luxury Adamo laptop range is using a design ethic that is Apple's, rather than some in-house developed idea. In creating a Windows or Android smartphone, Dell would just be joining the ranks of other generic smartphone makers, though HTC did escape that problem by partnering with Google to build the first Google Android phone, the G1.

Will Dell makes its phones stand out by bringing the camera expertise of Sony or Samsung to a high-end digital camera/smartphone device? Probably not. Will it bring the remarkably useable OS X and much-cloned innovative design thinking of Apple? No.

If Dell is indeed to enter the market for cellphones, it'll have to really break away from its "vanilla box" heritage to differentiate its products. Which is of course why there're a few analyst-sourced rumors that Dell could be considering a buy-out of Palm: the upcoming Pre, and its excellent new webOS would be a great way to hit the ground running.

[via Computer World]