UPDATE 2-Dell developing mobile devices for China Mobile

Mon Aug 17, 2009 1:51pm EDT

*Dell making mobile products for China Mobile

*Reports say it is developing smartphone for China (Adds analyst comment, background)

NEW YORK/SAN FRANCISCO Aug 17 (Reuters) - Dell Inc DELL.O is developing mobile devices for China Mobile Ltd (0941.HK), according to spokesmen for the computer maker, which has long been rumored to have ambitions in the smartphone market.

According to reports, Dell will launch a handset in China called the Mini3i that will offer a full complement of music, games and other downloadable content.

Dell said only that it is developing mobile products for China Mobile's network, but declined comment on the type of devices or the timing.

Spokesman Matthew Parretta said Dell did show off a proof-of-concept mobile device prototype at a Monday event for China Mobile's applications store.

Rumors have been circulating for months that Dell planned to launch a smartphone, as global sales of the devices continue to sizzle. The smartphone market grew 27 percent in the second quarter, according to research house Gartner.

Dell, the world's No. 2 maker of PCs, would be just the latest computer maker to embrace smartphones, which tend to carry higher margins than PCs.

Taiwanese rivals Acer Inc (2353.TW) and ASUSTeK Computer Inc (2357.TW) are also entering the market, which is dominated at the high end by Apple Inc's (AAPL.O) iPhone and the BlackBerry from Research in Motion Ltd RIM.TO.

CL King analyst Lawrence Harris said the Dell smartphone is reported to be a 2G device that runs on Google's Android platform. He said a 2G smartphone can work in China, where a 3G network is still being rolled out.

"It makes sense for a company like Dell to enter the smartphone market, but what they need to do is find something that sets themselves apart."

Shares of Round Rock, Texas-based Dell fell 2 percent to $13.92 in afternoon trading on the Nasdaq. (Reporting by Sinead Carew and Gabriel Madway, editing by Gerald E. McCormick)

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