Manufacturers snub Dell's low-cost Pocket PC

Dell has run into trouble with its rumoured plan to sell a Pocket PC handheld computer, according to a report.

The PC manufacturer, which specialises in undercutting its competitors through an efficient direct-sales strategy, has been examining the handheld computer market, according to sources. But a report in Taiwanese industry journal DigiTimes on Tuesday suggested that Dell is having trouble finding a manufacturer to produce such a device for a cost low enough to distinguish it from competition such as HP's iPaq.

Dell took bids on the project from High Tech Computer (HTC), Wistron, Compal Electronics and Mitac International, asking for a product "similar to the iPaq" to retail for $299, according to the report. Three have now backed out, claiming that such a device was a money-losing proposition.

A report last month from market researcher ARS speculated that the PC giant was getting ready to place an order for Pocket PC devices with a Taiwanese manufacturer. The report suggested that Dell had become interested in handheld computers because of their ubiquity in the corporate market.

Sources told ZDNet UK that the company had not yet made any decisions, but was evaluating devices that combine the functions of a PDA and a mobile phone.

If the Taiwanese report is accurate, it would be a setback for Dell's plans. The company would need to begin manufacturing soon in order to hit the Christmas shopping season. A delay might force Dell to continue with its current policy of reselling Palm OS and Pocket PC devices from other manufacturers.

"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," chief financial officer James Schneider said at a recent 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 be likely to 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.

CNET News.com's John Spooner and Margaret Kane contributed to this report.

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