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Dell is planning its first foray into the handheld market and is negotiating with several Taiwanese vendors to produce a higher-end product to gun against rivals Toshiba and Hewlett-Packard, reports this week indicate.

A report released Thursday by market analysis firm ARS speculates that Dell will soon place a large order for branded handheld PCs based on Microsoft's Pocket PC operating system. Although the report, written by ARS handheld PC analyst Sam Bhavnani, cites rumors in Taiwan, an ARS representative said that Bhavnani has had regular communications with a Dell handheld product manager.

Dell has publicly stated that it is looking for opportunities in new markets like handhelds and mobile projectors, acknowledged Cody Pinkston, a Dell spokesperson. He said Friday the company would not comment on rumors or speculations. The company recently began selling branded projectors.

Dell already resells a number of personal digital assistants (PDAs), including Palm OS-based handhelds from Palm and Sony, and Pocket PC-based devices from Casio, HP, and NEC.

However, HP is phasing out its line of Jornada handhelds now that it has acquired Compaq. Instead, HP will push Compaq's IPaq line of handhelds. Given that Dell and Compaq have been longtime rivals, it is unlikely that Dell would want to resell Compaq-designed handhelds, and it may be looking for a branded PDA to compete with the IPaq.

"The 'new HP' is clearly the target here," said ARS senior analyst for mobile computing Matt Sargent, who worked with Bhavnani on the report.

Shifting Offerings

According to the ARS report, Dell is most likely looking to round out its product line for enterprise customers, and would want to produce a high-end handheld with wireless connectivity, perhaps based on Intel's new Xscale processors.

"Dell is very much of an Intel house," Sargent said. "And since IPaq is so dominant, to evolve this marketplace they will probably use Intel at a very high end."

Both Toshiba and HP will soon have new XScale-based devices on the market, according to ARS.

But Dell's strong brand name and positive relationship with Taiwanese manufacturers may allow it to offer a similar product at a lower cost, Sargent added.

Taiwanese vendors might be willing to strike a particularly attractive handheld deal with Dell in the hopes of gaining future notebook manufacturing contracts, the researcher noted.

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