Five Reasons Dell Should Leave Smartphones Alone

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According to reports from The Wall Street Journal, Dell has been working on smartphone prototypes for more than a year. The prototypes include a device with a touch-screen keyboard, similar to the Apple iPhone, and another device with a full slide-out QWERTY keyboard, similar to the recently announced Palm Pre.

But the computer giant is joining the party a little too late to actually make a splash.

The smartphone market is already crowded, with the likes of BlackBerry, Apple and Palm jockeying for market share. Can Dell get into the market this late and be successful, while also offering innovative products? Probably not. Sure, Dell has been innovative in other facets of the high-tech biz, but when it comes to smartphones, establishing yourself as a major player in an overcrowded field seems more like a waste of time.

Here are five reasons Dell should pack up its toys and go home, before a smartphone flop blows up in its face.

1. You can't beat the Apple iPhone

Many have tried to dethrone the iPhone from its high perch as king of the touch-screen devices. The BlackBerry Storm has yet to reach the summit, and other competitors from the likes of Sprint, T-Mobile and more are still tackling the first hundred feet. Word is Dell is looking to build its own iPhone clone, a touch-screen smartphone that would rival Apple's consumer device darling. Fat chance, considering Apple managed to unload 2.4 million iPhone 3G models in just its first quarter. Success like that would take something more than a rip-off, and we doubt that Dell has what it takes.

2. Isn't Dell trying to save money?

Granted, smartphones are relatively inexpensive to manufacture, with the iPhone costing around $174 and the BlackBerry Storm costing about $203 per unit, according to a recent iSuppli report. And, oftentimes, smartphone margins are pretty high. But in this time of economic uncertainty, branching into a new market could work against Dell, especially when the company recently revealed a plan to cut $3 billion in operating expenses to combat slumping PC sales.

3. Remember what happened to the Axim?

Dell already tried to crack into the lucrative mobile device market with its Axim line of Windows Mobile-based PDAs. Dell's Axim Pocket PC play, an early iteration of a true smartphone, was short-lived, fizzling out about five years after it made its debut in 2002. The Axim family, which saw several models, was officially discontinued in April 2007 amidst declining sales of PDA form-factor devices, a similar fate suffered by Palm's original line of handhelds. The difference, however, is that Palm forged on, and forged on quickly, capturing early smartphone sales. Dell, on the other hand, let the Axim line die and left it dead for a while before going back to the drawing board. This much time out of the market could work against Dell as it tries to gain traction in a market it abandoned once already. Does any smartphone user want to hang their hat, or their data, on a device made by someone that has already failed in the market?

4. No one likes a Johnny-come-lately

You got to start somewhere, but unless Dell is bringing something new and innovative to the smartphone market, it shouldn't even bother. Of course, Dell hasn't officially made its smartphone intentions known or even confirmed that a smartphone is on its product road map. But if one is, it darn well better be good. If Dell builds a touch-screen, it's already been done. If Dell tries its hand at a 3G device, it's been done ad nauseam. Is there really anything new that Dell can add that hasn't been done already or isn't currently under development by market masters Research In Motion (RIM) Ltd., Apple or a host of others that want their piece of the smartphone pie? Doubtful.

5. Dude, you're gettin' a Dell

Dell has become somewhat notorious for its customer service, or lack thereof. Just this month, Dell reached a $3.85 million settlement with 46 states that complained of customer service abuses by the company. In a statement, Connecticut Attorney General Richard Blumenthal called Dell's abuses "significant," noting "customers faced unacceptable obstacles obtaining warranty service on their Dell computers and others said they never received promised rebates.

"Dell must hit delete and then reprogram and restart customer relations by keeping all its promises. More than the money, this agreement provides profoundly important business practice reforms," Blumenthal continued.

Dell, however, said the issues brought in the legal settlement affected only a "small percentage" of customers, and many of the business practices raised in the complaint had been eliminated by the computer manufacturer before the settlement.

Still, that wasn't the first time Dell was in hot water for shady practices. In May 2008, a New York State Supreme Court Judge said Dell was running a classic bait-and-switch scheme and denying customers promised deals. "Dell has engaged in repeated misleading, deceptive and unlawful business conduct, including false and deceptive advertising of financing promotions and the terms of warranties, fraudulent, misleading and deceptive practices in credit financing, and failure to provide warranty service and rebates," the judge wrote.

Lawsuits based around customer service issues aren't too enticing to the smartphone-buying public, which is always wary of someone trying to pull a fast one. If Dell expects to succeed in the smartphone market, it had better keep everything above board, or the initiative will go bust before it begins.