In late 2000, the CEO of a small handheld company confided in me that on a recent trip to Taiwan he learned that Dell was seriously contemplating entering the PDA market. If this is true, I thought, it would be big news that would rock the handheld world. Should Dell, which had become a market leader in PCs and servers through direct sales and low prices, enter the fray with a Dell branded handheld, prices would surely drop, as would margins. The implications were enormous.
However, Dell was sending mixed messages about the handheld market. In January 2001, CEO Michael Dell told a group of journalists in London that the handheld market wasn’t a priority for Dell, stressing that while handheld and notebook markets would likely be similar in terms of unit sales in five years, notebooks would still achieve ten times the revenue of handheld computers.
Curious, I pursued the story with my sources in Austin and Taiwan. What I found out was that Dell was indeed interested in the PDA market, specifically Pocket PCs. In fact, it had created a small handheld group within the company to conduct research into the viability of a Dell branded handheld. But it dissolved the group after its analysis showed that there were few profits to be made. Maybe Michael Dell was correct.
Then, several months later, Compaq and Hewlett-Packard announced that they would merge.
The union of Dell’s archrival, Compaq, with Hewlett-Packard would create a single source, a “one-stop shopping”, of sorts, for technology for enterprises and consumers. It would also mitigate the obvious weaknesses in each company, weaknesses that Dell had attacked over the years. Dell decided it needed to do something about “the new HP”.
Dell decided to fight fire with fire. It devised a one-stop shopping agenda of its own, pursuing areas of technology it had previously been content to co-brand, areas such as printers and, yes, even handheld computers. It teamed with Lexmark to announce that it would launch a new line of Dell branded printers and printer accessories, aiming for the heart of the new HP. Then word leaked out that Dell had a proposal before the leading OEM’s, from HTC to MiTAC to Compal, for a Pocket PC that would compete directly with HP’s successful iPAQ.
The war was on.
Still, despite its past history of success, I can’t help but wonder whether Dell will be as successful in the new world of PDAs.
For one thing, I question whether the handheld market has matured to the point of commoditization, something Dell relies on since it typically outsources the design and manufacture of its products. Only Wistron, the recently spun-off design portion of Acer, offered an acceptable bid to Dell, and it’s questionable whether it is making a profit or simply using it as a loss-leader in an attempt to either enter the Pocket PC OEM space or garner Dell’s notebook business. But Dell could also be looking to eventually bundle its handheld with a notebook or desktop computer as a way of increasing sales. Second, I doubt whether direct sales will be as effective with PDAs, which have predominantly been sold in the retail channel, as it has been for Dell with PCs and laptops. Finally, handhelds rely on snappy design, more so than desktop computers do, and I haven’t seen anything from Dell that I would consider “cool”.
Still, Dell will have a dramatic impact on PDA pricing, and it will likely reach its goal of cornering 7%-8% of the handheld market, or 25% of the Pocket PC market, within a year. But whether it will be able to hurt HP and its successful iPAQ line of Pocket PCs is anyone’s guess.
Both Dell and HP will unveiled new Pocket PCs at this year’s Comdex trade show.