Chicago (IL) - Dell's rumored smartphone probably does exist after all. That is, if you believe the ambiguously crafted words of the company's CEO, Michael Dell, who said that yes, Dell is kind of working on the iPhone-killer after all. The phone is already contracted for manufacturing, but it hasn't yet entered the production phase because carriers have yet to give it the greenlight. Michael Dell also said that acquiring other established phone makers is on the table as well, echoing some analysts who suggest Dell buys itself a ticket into the mobile arena by acquiring Palm.

"It is true that we are exploring smaller screen devices," Dell said at a speech in Tokyo yesterday -- warning that the company has yet to make an announcement. While Dell's "smaller screen devices" may indicate a tablet PC or a netbook as well, most of us have no doubts that Dell is eyeing the smartphone market. The huge slump in the computer sector, combined with the smartphone market's unusual resilience to the recession, gives PC makers many incentive to expand their business into the mobile phone market.

Michael Dell indicated that it's not just devices themselves, but the entire ecosystems built around smartphones may translate into new revenue streams. Companies like Apple have shown that software and an accompanying distribution service (App Store) can stimulate hardware sales, creating a convincing proposition for developers, accessories makers and a reason to buy for end users. Other mobile platforms have also followed Apple's move by announcing their own application stores, including Nokia and Microsoft who both pledged to open their respective application bazaars for business in the coming months. But does Dell have the expertise and engineering ingredients to come up with a stylish smartphone that everyone will want?

According to the CEO, Dell packs vast experience with 3G technology in portable devices as an important advantage. "For the last three years we have integrated 3G radios into our notebooks," Dell noted. "We already have agreements with many mobile carriers around notebook devices so it wouldn't be unreasonable to expect that we would have smaller mobile Internet devices or smartphones in the future," he said in a nod toward the rumored Dell-branded smartphone.

The phone almost entered the manufacturing phase. Taiwan-based Commercial Times reported yesterday that world's largest contract manufacturer of electronics, Hon Hai Precision Industry (also known as Foxconn), has already received orders to build Dell's smartphone. However, it appears the actual manufacturing was probably halted as carriers rejected Dell's phone, citing the "lack of differentiating features" as reported by Kaufman Bros analyst Shawn Wu.

The PC vendor didn't comment on the Commercial Times article or on Wu's report. Some analysts suggest Dell should acquire the struggling Palm set to launch the webOS-powered Pre handset slated for a June 30 arrival on Verizon's network. Dell would not confirm this beyond saying that acquiring other phone makers remains an option if that's what it takes to enter the game, but he also noted the company is not exploring that avenue presently.