Michael Dell has confirmed that Dell is working on small-screen devices, while analysts reckon the company has shelved existing plans in order to provide services with its new devices.

Dell was speaking at Computerworld in Tokyo on Tuesday, and stated explicitly that his firm is "exploring smaller-screen devices".

The firm is thought to have been working on smartphones based on both Android and Windows.

But in a note to investors reported by eWeek, Shaw Wu, of Kaufman Brothers, advised that Dell had shelved all existing plans, because the devices are insufficiently different from the competition, and that Dell is looking to acquire some services companies to pad out the offering.

Services are very in at the moment - Apple demonstrated that manufacturers can continue to make money from customers after they leave the shop. The boys from Cupertino were hardly the first, but they're certainly been the most visible, and everyone has followed suit.

These days all the major manufacturers offer music, movies and applications, with Google and Microsoft starting to fill in for those who don't. On-line backup and hosted services are the next stage, and though half a dozen third parties already offer such services, it is hard to compete with what comes pre-installed.

The Palm Pré is interesting as it embraces the third-party providers with such enthusiasm - it has an address book that integrates directly with social networks and a local search that sees Google as a local resource. Palm will maintain a monopoly on applications, but has shown no interest in other media - preferring to make money the old fashioned way.

Wu reckons that Dell has created prototypes running both Android and Windows Mobile, but shelved them as being too bland. He also suggested that Dell is planning "vertical integration of some sort including software and/or services", from which Wu infers "Dell is contemplating making acquisitions to help in this effort".

But that process will take time, and Dell will have to move pretty fast if it's going to avoid creating a suite of on-line services that fail to differentiate from that offered by everyone, and their brother. ®