Why Dell needs a handheld

• Handheld devices are popular, but demand for smart phones in particular has skyrocketed in the last year. Smart phones now account for 12 percent of the US cell phone market, according to data collected by NPD Group. Smart phones' share of the handset market doubled from 4 percent to 8 percent in one quarter at the end of last year. As consumers continue to expect all their gadgets to be mobile, Dell could get in on that demand. Plus, it has demonstrated brand awareness and a US$4.5 billion marketing budget to play with for the next three years.

• A consumer-focused smart phone or handheld device that is done well would show a commitment to innovation. The company's historical business, PCs, isn't exactly a hotbed of creativity. The industry is more mature and is now mainly about cranking out products quicker and cheaper than the other guys. But smart phones, where there are many new technological possibilities, are essentially becoming small PCs. While leading-edge technical innovations have not been the hallmarks of Dell or the personal computing industry in recent years, it doesn't have to be that way, as Apple has demonstrated.

Making a consumer gadget is necessary for Dell if it wants to be a consumer products company and compete with Apple and HP. "They can't be just a PC company," said Stephen Baker, vice president of industry analysis at NPD Group. And a printer and ink business doesn't really count. "They need some cutting-edge, convergence, HD content-type products to become a relevant piece of the market, (to be more) than just a PC company."

The company's obviously not opposed to trying new form factors or device categories. Soon Dell will be selling its first tablet PC, and it recently reworked its humdrum desktop offerings with the very consumer-friendly XPS One. It also has experience trying new consumer electronics products: TVs, portable music players, and a home music player.

Sure, it dropped out of all of those, but Dell didn't necessarily have to exit the TV market, some would say. "Not only should they have stayed in TVs, they were in earlier (than most). They just screwed it up," said Baker. Eventually its LCD TV prices weren't low enough to compete with other consumer electronics makers and it abandoned making its own Dell-branded TVs. "When things got tough they lost interest," but if they stuck with it or had a better strategy from the start, they could have been successful, he said.

• Which is why now could be a good time to start fresh. A gadget with a flashy design with the right price would demonstrate how Dell understands consumers. Consumer demand for gadgets is higher than ever right now, particularly in a world where converged devices that connect to each other are the next frontier. Technology from Zing, which is used to share and download music wirelessly, could easily be incorporated into such a device. And now Dell has a brand-new retail presence where it could get attention from non-Dell customers, such as at Best Buy or Wal-Mart Stores.

Timing is everything, of course. Watch what Dell says at CES this year, where it could launch any number of new product categories. The company has something up its sleeve, though what is not entirely clear yet, Baker said. "That doesn't mean it has to be a handheld, but they need some other place to go."

This article first appeared on CNET News.com