Little-noticed announcements can lead to fortunes for investing sleuths. That's why I keep a hyperactive Fool sense. It's tingling today, thanks to U.K.-based trade magazine Marketing Week, which on Feb. 28 reported that Dell (Nasdaq: DELL ) plans a new line of branded mobile phones.
Look, I know it sounds like there's as much chance of Dell selling phones as there is a fleet of stunt-flying pigs circling the PC maker's Round Rock, Texas headquarters.
There's just one problem: This rumor makes sense for a number of reasons. Let's begin with the obvious. Dell's new consumer group is being led by former Motorola (NYSE: MOT ) executive Ron Garriques, who had been responsible for the firm's $28 billion mobile devices division.
He'll have broad authority, too -- if, that is, you believe the press release: "Mr. Garriques will lead a new organization that will include the portfolio of all consumer products -- from desktop and notebooks to software and peripherals, as well as product design and sales." [Emphasis mine.]
When's the last time anyone at Dell was singled out for being in charge of product design? Can't name anyone? Me, neither.
Not that you or I should be surprised. Poll consumers on the street, and they'll tell you: Dell is less about design, and more about providing functional hardware on the cheap. You want design? Buy a black turtleneck and a pair of wire-rim specs, and head on over to one of Apple's (Nasdaq: AAPL ) retail stores.
Elements of style
Or at least, that's how it has been. With Garriques, new CEO Michael Dell may finally be working to change Dell's stodgy, utilitarian image. That brings me to the second reason this rumor makes sense: Dell and Apple have been on a collision course ever since the Mac maker decided to adopt chips from Intel (Nasdaq: INTC ) in the summer of 2005.
At the time, Dell told David Kirkpatrick of Fortune that he'd be thrilled to license the Mac OS on an Intel platform. Quoting from back then: "If Apple decides to open the Mac OS to others, we would be happy to offer it to our customers."
But the iEmpire would have none of it. Apple marketing chief Phil Schiller told the audience at the Mac maker's Worldwide Developer Conference that year that the Mac OS would be built solely for Macs, though Windows on a Mac was likely inevitable.
Turns out it would take only 10 months. Apple's share of the global computer market -- and its share price -- has been climbing steadily since. And Dell? Its market-share crown now belongs to Hewlett-Packard (NYSE: HPQ ) .
Is Dell 2.0 Apple 1.5?
Now, Michael Dell wants to create Dell 2.0, which, if his public remarks are to be believed, will be an effort to cut the fat from the supply chain. I have my doubts that will do much, though a sensational shareholder lawsuit says that Dell has long lived comfortably thanks to Intel's largesse. Ugly margins in the latest quarter, which included no Intel support, lend credence to the theory.
Still, I defy you to find a business that has successfully cut its way to growth, as Dell has said he wants to do. Can't think of one? That's because there isn't one.
Which brings me to the third and final reason why this rumor makes sense: Michael Dell isn't a moron. He knows he's going to have to invest to produce growth, and that growth will probably have to come from new markets.
Enter smartphones, a growing market globally, dominated thus far by Nokia (NYSE: NOK ) . The smartphone sector requires exactly no telephony experience to succeed. Witness Palm (Nasdaq: PALM ) with the Treo, and Research In Motion (Nasdaq: RIMM ) with the BlackBerry.
Furthermore, mobile may be Dell's best chance to compete with Apple, whose iPhone isn't due before June, and H-P, which has had modest success in smartphones but isn't a leader. In short: Mobile is as close to a green-field opportunity as Dell can get right now. Expect Garriques to take it. And while you're at it, watch out for those flying pigs.
Fool contributor Tim Beyers, who is ranked 1,500 out of more than 23,800 in Motley Fool CAPS, thinks Dell used to be a great brand like Apple. Tim owns shares of Nokia. Get the skinny on all of the stocks in Tim's portfolio by checking his Fool profile. Intel is an Inside Value recommendation. Palm is a Stock Advisor pick. The Motley Fool's disclosure policy wants to give your portfolio an extreme makeover.