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Dell's eventual entry into the printer and personal digital assistant markets will cause headaches for some vendors and delight users as the company drives down prices, analysts said Friday.

Chairman and Chief Executive Officer Michael Dell confirmed the company will sell printers and PDAs during a Thursday press conference announcing the company's earnings. He would not specify when printers and PDAs will be sold, but said the company views both areas as "attractive markets." Dell recently branched out from its core business of systems to market projectors, as well.

Hewlett-Packard is the acknowledged leader in the enterprise printer business, where Dell will initially look to compete with large laser printers, said Steve Baker, director of research at NPD Techworld. In the past, Dell has resold HP printers, PDAs, digital cameras, and other peripherals, but that arrangement ceased when HP acquired Compaq.

"High-end printers are a high price-point, low-volume market, and Dell's opportunities will be much better there in the short run," Baker said. Dell's traditional strength has always been in the business markets, and only recently have its products grown among consumers, he said.

HP will be forced to examine its business model and see if it can find a way to price its products more aggressively, Baker said.

Dell's ability to deftly manage its manufacturing and distribution activities will serve it well in the printer business, said Rob Enderle, research fellow at Giga Information Group. Due to the strength of the enterprise printer players, however, Dell will probably look first to partner with a more established company, like Lexmark or Xerox, he said.

PDA Opportunity

While the printer market may seem like a more natural complement to Dell's PC and server businesses, both analysts agreed that the handheld market has more potential in the long term.

"The adoption of PDAs and wireless connectivity is pretty low right now, so there's a lot of opportunity in vertical markets," Baker said. Consumer PDA leaders Palm and Handspring haven't spent as much time developing the enterprise handheld market, he said.

"Handhelds are more simple and Dell-like," Enderle said. The margins on printers are extremely low, with many machines sold at near cost, and companies looking to make their money on ink cartridge sales, he said.

Dell will attempt to get products out in the fourth quarter, Enderle said. Initially, the company will compete mainly on price, but will look to incorporate new features and options into the second generation of its products, he said.

"Dell has proven they can bring out quality products at lower prices. Businesses are looking for value above all else right now, and if [the products] are good enough, they'll do okay," Enderle said.

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