Did Apple Do Dell Another Favor?

China was supposed to belong to the iPhone. Sorry, Apple (Nasdaq: AAPL  ) ; Dell (Nasdaq: DELL  ) beat you to it.

According to The Wall Street Journal, China Mobile (NYSE: CHL  ) has brokered a deal to introduce a Dell-branded smartphone within the borders of the Sino superpower soon. The phone, dubbed the "mini3i," will support music, games, and software sold through China Mobile's version of Apple's iTunes.

Anyone else see this as a huge loss for Apple? Notice I didn't say that this is a huge win for Dell. Perhaps it could become one over time, but we have yet to see what Dell's smartphone can do. We don't know how it will be positioned to compete against Research In Motion's (Nasdaq: RIMM  ) BlackBerry, which China Telecom is negotiating to carry.

If I'm not optimistic that Dell will create a globally competitive smartphone, it's because software is increasingly what distinguishes the great handsets from the good, and the good from the bad. For the iPhone, it's the iTunes App Store. For the BlackBerry, it's push email. For Nokia (NYSE: NOK  ) , it's the market-leading Symbian OS today, and Microsoft's (Nasdaq: MSFT  ) Office Mobile tomorrow. Dell has zero experience with software.

What's that? Dell doesn't need software, thanks to Android? Fine, but how would an Android-powered mini3i set itself apart from other Android handsets? How would it beat HTC's touch-screen phones? How would it compete with the feature-rich Palm (Nasdaq: PALM  ) Pre on our shores?

That's assuming Dell even gets a chance to sell a smartphone here in the U.S. -- it may not. The "mini3i" is for China, and that's bad news for Apple. Hundreds of millions of would-be iPhoners will now get a Dell, or a BlackBerry, or avoid smartphones altogether.

Dell didn't win this round. Apple lost it.

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Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He owned stock and options positions in Apple and a stock position in Nokia at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. The Fool's disclosure policy is not here right now. Leave a message at the tone ... (click) Beeeeeeeeeeeeep.


Read/Post Comments (6) | Recommend This Article (5)

Comments from our Foolish Readers

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  • Report this Comment On August 18, 2009, at 2:15 PM, DefunctAcct wrote:

    Why would this be a loss for Apple?

    As of now, Dell is showing a 2G model, with no software applications.

    When iPhone gets into China, it will come with App Store, full software suite and 3G.

    If it is cheap versus premium phones, Apple is not one to go after Dell's cheap phone segment. So where is the loss?

    If it is early penetration, it still will make little difference because those who want a Dell will get one and may stay with it. Those who want an iPhone will most likely wait.

    Even if Apple cannot sign a deal to sell in China, is it really a loss because of Dell? More like Apple cannot ink a deal with a carrier. So Apple is shut out of a large market because of contractual disagreement, not because of head to head handset comparison.

    I find the logic of this article lacking.

  • Report this Comment On August 18, 2009, at 2:33 PM, TMFMileHigh wrote:

    Hello silivalley,

    Normally, I don't like answering a question with a question but this should explain the loss:

    Who will carry the iPhone in China?

    China Mobile was to carry it, but a deal couldn't get done. Now Dell has the business. RIM looks to be getting the China Telecom biz. Who's left?

    This isn't about Dell's handset -- the article doesn't even speak to that. This is about how Dell did what Apple apparently wouldn't: Allow CHL to sell smartphone content on its terms, via a store it owns.

    Thanks for commenting and Foolish best,

    Tim (TMFMileHigh and @milehighfool on Twitter)

  • Report this Comment On August 18, 2009, at 2:45 PM, MurphyMacdotCom wrote:

    I agree with sillvalley. Looks like Apple flamebait to me Mr. Tim.

  • Report this Comment On August 18, 2009, at 3:00 PM, TMFMileHigh wrote:

    Hello MurphyMacdotCom,

    >>I agree with sillvalley. Looks like Apple flamebait to me Mr. Tim.

    Okay. We'll agree to disagree, and thanks for writing.

    Foolish best,

    Tim (TMFMileHigh, Apple shareholder, and @milehighfool on Twitter)

  • Report this Comment On August 18, 2009, at 6:30 PM, DefunctAcct wrote:

    Tim,

    OK, I understand your post does not compare the handset, so please allow me to clarify. My question of the logic remains the same.

    Apple has no sales in China at this point.

    Dell will soon be selling a 2G in China.

    Apple will have no revenue from China for now.

    Dell will soon generate revenue in China.

    Apple has nothing to lose in China because Apple is not yet in China.

    Dell can report whether it is making a profit or taking a loss from its 2G handset sales.

    Apple continues to be profitable and cash-rich.

    Dell continues to be ??? and cash-????

    Apple has continued to grow its Mac, iPod TOuch and iPhone shares without China.

    Dell experiencing low PC sales and China?

    Apple is growing and NOT losing money; China or not.

    Dell is ?????

    From a strictly logical point of view, Apple cannot lose anything it does not even have. This is like saying McDonalds has no franchise in Madagascar so it must be a loss; huh?

    If your point is that Dell got there first, then it is not a matter of "losses" but a matter who gets in first. If Palm or RIMM were there first with a high-end much sought-after device, I would be watching closely because that could create a barrier to the iPhone. Given Dell is making a 2G device with no software identity, it is no different than the thousands of 2G or cheap devices already on-sale in China. There is no meaningful differentiating factors except for the American brand of Dell. The device, as we know it today, seems a lower-end offering targeting the less-discriminating consumers of China, so Dell is not even staking a claim in the same space as the iPhone or Pre or Berries. So to compare Dell's offering to the iPhone is like comparing Mercedes to Yugo? Yogo got there first so Mercedes lost? I am lost by this comparison. Thus I raised a question regarding the logic of the article.

    Thank you.

  • Report this Comment On August 19, 2009, at 3:42 PM, Netteligent09 wrote:

    Dell keeps digging so deep that it could not climb out of.

    Netbooks=Windows Vista are the worst products of all.

    Save your money for difficult time ahead. No Job. No Money. No Honey, No Health Insurance, etc..

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