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Dell has been knocked back by three of the four Taiwanese handheld makers lined up to tender for the contract to make its first handheld PDAs.

The cut-throat price demanded by Dell left little profit margin, the firms which pulled out of the bid concluded, Digitimes reports.

The newswire names High Tech Computer (HTC), Wistron, Compal Electronics and Mitac International as the four companies involved in the final stage of the bid (which has been going on over the last month), but doesn't reveal which of the four is still in the running.

Quoting unnamed sources involved in the bid, Digitimes said that Dell plans to price its first PDA at around $299 and release it in time for Christmas. It asked manufacturers to come up with a device similar to Compaq's iPaq but without specifying the device's configuration, something which reportedly did little to improve its prospects in striking a deal.

With only one company left considering its options, Dell's handheld plan appears close to floundering. This would leave Dell with little option other than to delay the launch or resell products from other manufacturers.

Dell itself has made no comment about its possible plans to enter the handheld market.

Although the launch of PDAs represents a natural extension to Dell's brand the PDA market is a different animal from the PC market that Dell has taken by storm.

True PDAs are becoming increasingly commonplace but the scope for Dell to commoditise the market, and cut out the middleman, is more limited than with
computers. Whichever way you look at it backlit colour LCD screens are expensive, added to which the manufacturing process is more complex and involved.

The market is also rapidly reaching maturity, which is among the reasons PDA vendors such as
Handspring are looking towards smartphone style device which bring together the functions of phone and PDA to drive the next stage of their growth.

In January last year on a visit to London, Michael Dell downplayed the important of handhelds to company in particular and the overall IT market in general. He did, however, say that handhelds would get more interesting once wireless technology is embedded in Palms and PocketPCs.

Well that time is now and the question is whether Dell can get anyone interested in its business model for the handheld market or whether it will have to compromise on either functionality or cost in its bid to find a suitable partner. ®

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