Dell is primed to enter the mobile-phone arena with a smartphone, but it will need an Apple iPhone killer to really make a dent in the market, analysts have said.

A recent report from Digitimes suggested that Dell was working with Foxconn Group to develop Windows Mobile-based handheld devices. Neither Dell nor Foxconn have confirmed the news.

The development of smartphones, however, seems like a logical step for Dell to expand its presence in the mobile market, said Neil Mawston, director of wireless device strategies at analysis firm Strategy Analytics.

Dell competitors Apple, Hewlett-Packard and Toshiba are already present in mobile computing with smartphones and PDAs (personal digital assistants), and the market is just too big for Dell to ignore, he said. The company already makes cellular laptops, and the move to smartphones isn't a big leap, Mawston said.

However, Apple is well ahead with the iPhone, and to attract consumers, Dell will need to make a splash with an attractive handset featuring the right operating system and content.

A rumoured announcement in support of Google's Android mobile platform never materialised at last month's Mobile World Congress in Barcelona. Dell may adopt the Microsoft Windows Mobile OS for its smartphone, which will be a good win for Microsoft, Mawston said.

Dell last year tapped former Motorola executive Ron Garriques to be the new president of Dell's global consumer division, which could suggest that Dell is working on some form of a smartphone, Mawston said. Garriques had led Motorola's PCS (personal communications services) division for Europe, the Middle East and Africa, as well as Motorola's US$28 billion (£14 billion) handset division.

The smartphone will be an effective replacement for Dell's previous Axim personal digital assistants, which it killed last year, citing a declining market for pen-based PDAs. Dell's Axim product portfolio was weak with not many devices on offer, Mawston said.

Dell’s move away from a direct sales model could help in sales, Mawston said. Now it is selling its products through stores, it is gaining traction through relationships with retailers and carriers to distribute the smartphones, said Andrew Brown, director for wireless enterprise strategies at Strategy Analytics. Dell has a relationship with Vodafone in Europe and Verizon Wireless in the US to bring third-generation wireless broadband connectivity to Dell notebooks.

The company will definitely need a stronger European distribution network, Brown said. Tie-ups with companies like supermarkets Tesco and Carrefour could help in the sales of prepaid phones, not high-end smartphones. Dell will need to tie up with established retailers like Dixon's or Carphone Warehouse to be competitive, Brown said.