Dell taking smartphone business to new areas

Telefonica could distribute Dell smartphones in the future, analysts said

Dell on Tuesday announced a partnership with telecommunications provider Telefonica to develop mobile products and services, which would expand its smartphone business in Latin America and Europe.

The companies will jointly focus on developing "smart mobile products" and services, a Dell spokesman said, declining further comment on what devices or services would be developed as part of the partnership. However, analysts said the relationship sets the stage for Telefonica to offer Dell's mobile devices, which include smartphones, tablets and netbooks, in the future.

Dell makes a pair of smartphones with Google's Linux-based Android operating system. The Mini 3i smartphone first became available in China through carrier China Mobile in late November. The company also makes the Aero smartphone, which will become available soon in the U.S. through wireless carrier AT&T. Dell also offers Inspiron Mini netbooks and is developing the Mini 5 tablet, which includes a 5-inch touch screen.

The Telefonica deal is a major win for Dell, said Will Stofega, program director at IDC.

"It's a big international player and has a lot of assets in Latin America," Stofega said. The company has a presence in most South American countries and also offers telecom services in Mexico. Telefonica also has a presence in European countries including Spain, the Czech Republic and the U.K., where it offers services through O2.

For Telefonica, Dell is a safe company to partner with as it brings a wide range of mobile products to the table that few companies can match. Companies like Apple, Google and Nokia offer mobile devices and services but can't match Dell on netbook offerings, he said. Recent IDC PC shipment numbers have shown a boost in netbook shipments in Europe through wireless carriers that bundle the low-cost PCs as part of mobile broadband contracts.

Wireless carriers want to subsidize phone offerings to under US$200, which Dell can do, Stofega said. Dell also has the mass production and mass distribution capability for its PCs that it can apply to cell phones.

Dell has already established partnerships with wireless carriers to distribute its mobile products, including Vodafone in Europe, Australia and New Zealand, M1 and Starhub in Singapore and Claro in Brazil.

Smartphones are a small piece of Dell's business, but will become an important component for the company to deliver mobile products and services, said John Spooner, analyst at Technology Business Research. A partnership with Telefonica could help improve smartphone and netbook shipments. Establishing a larger mobile business builds the potential to provide more data and Web-based services to consumers and enterprises, Spooner said.

Dell is taking the right steps to enter the mobile device business, but the partnership with Telefonica doesn't guarantee success, analysts said. The company is a late entrant into a smartphone market dominated by companies like Nokia, Apple, Samsung, Research In Motion and LG Electronics. Even companies like Google and Microsoft have entered the market with specialized services offerings. The world's second-largest PC maker, Acer, is also vying for the same opportunity to bundle mobile devices with services, analysts said.

"Everyone wants to get in here and play," Stofega said.

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