Dell is again the subject of rumor that it is looking to enter a non-PC market, this time with a handheld mobile Internet device (MID). This comes just months after the firm was rumored to be shopping around a mobile phone that was rejected by the carriers.

The rumors resurfaced in the Wall Street Journal, citing people familiar with the company's plans to make an Android-based gadget that's slightly larger than Apple's iPod Touch but with similar touch screen capabilities.

Such a device wouldn't be much of a challenge if Dell (NASDAQ: DELL) already had a cell phone designed. All it would have to do is remove the cellular phone element from the device, which is pretty much what Apple (NASDAQ: AAPL) did with the iPhone to make the iPod Touch.

A Dell spokesman declined to comment on any rumor and speculation of unannounced devices.

Dell has been down this road before. It pulled the short-lived DJ music player that was meant to take on the original iPod but "was uglier," is how Rob Enderle of the Enderle Group put it.

Building interest in MIDs

Enderle knew that Dell had been working on the cell phone but said it was killed because there was nothing special about it.

"The carriers said the smartphone was a me-too product and weren't interested," he told InternetNews.com. He figures Dell might be trying to get carrier interest with a MID instead.

"A MID is more interesting because that's a lot more like the iPod Touch and there's only one product like the iPod Touch, and that's the Touch. So there's a lot more room in the market to compete and be a little different," said Enderle.

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One bit of advice Enderle has for Dell, should it go through with the device: forget the rumored ARM processor, go with nVidia's Tegra system on a chip, like Microsoft (NASDASQ: MSFT) did with the Zune HD. There are plenty of ARM-based Android devices coming out.

"They really need to push the envelope and make something distinctive and different," he said.