RealTime IT News

Dell, AT&T, Android: Too Late for a Threesome?

A Dell Android smartphone on the AT&T network will have to undercut the competition on pricing, and the hardware maker will need to nurture a tight relationship with the No. 2 carrier's distribution channels to be successful, according to an industry analyst.

The industry has seen "Delldroid" rumors come and go -- but a fresh batch of reports citing sources close to the company suggest that Dell (NASDAQ: DELL) is planning to deliver an Android smartphone next year.

A Dell spokesman declined to comment, but if reports are true, it would mark the PC giant's first foray into the smartphone market, after several fits and starts, and it would likely be AT&T's (NYSE: T) first handset based on Google's (NASDAQ: GOOG) open source mobile platform.

To make a successful entry into the sector, Dell will need to focus on how it works with AT&T's sales channels, according to Jack Gold, an analyst with J. Gold Associates.

"Android makes total sense because Dell is already playing with it in the Far East, but the biggest challenge is the distribution channel," Gold told InternetNews.com. "Traditionally, people buy phones from the carrier, but Dell doesn't have a tight relationship with them. It's not a traditional supplier, so they really have to focus on building that."

Gold said he expects Dell to use the same strategy it has used with laptops, selling the smartphone at a price below the industry standard.

"My guess is Dell will undercut the $199 sweet spot that's out there now ... and come in at $149 or $169 to make a successful play," he said. "I also see them selling some directly in places where they have partnerships already selling laptops."

The hardware maker would also need to introduce a model with some catchy features to stand out from the competition.

"If they come out with vanilla, will that work?" Gold asked. "I'm not sure, they may need Cherry Garcia because if it's not differentiated from the crowd with something sort of slick, it will get lost in the 'me too' crowd."

He explained that AT&T, currently the exclusive U.S. carrier for Apple's (NASDAQ: AAPL) iPhone, has everything to gain and nothing to lose by joining the Android party.

That opportunity took on a new dimension this week, when leading carrier Verizon unveiled its partnership with Google to develop and market Android handsets. Verizon is widely expected to announce its first Android offering, Motorola's Tao, within two weeks.

"They can't rely on the iPhone forever, and Android is only going to sell more and more, so AT&T would be foolish if it didn't want a piece of that action, especially after Google and Verizon were just up in the tree k-i-s-s-i-n-g, announcing their love-fest," Gold said. "Google wins no matter what because Android isn't tied to any one company, but even that wasn't quite clear even nine months ago."

Still, while some may question why AT&T would partner with a hardware maker with no proven track record of smartphone success, the gamble paid off pretty well when it made the same move with Apple.

Dell would be a late comer to the lucrative smartphone sector, which continues to post gains amid a wider cell phone slump. Worldwide shipments of smart phones are expected to rise to 235.6 million units in 2010, up 28 percent from 184.2 million in 2009, according to research firm iSuppli. Meanwhile, the firm is project the broader cell phone market to drop by 12.3 percent.

As a result, this year there's been a slew of signature releases, namely the iPhone 3GS and Palm Pre and Pixi, and the fourth quarter is seeing unprecedented momentum for Android-based devices.