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Dell Wins China’s Smartphone Game

It will be recorded as the largest mistake in Google’s history. I will be recorded as the biggest missed opportunity by Apple Corp. Dell announced today that it has inked a deal with Baidu to make a smartphone for the China market. While this is not making giant headlines in America, this is probably the biggest computer and cell phone story of the year.

CNet coverage of the story

Bloomberg Report

Some analysts are doubting the significance of the deal saying that Dell does not have a good track record with tablet computers. They are missing the point entirely because they are thinking with an American mindset. This deal is EXACTLY like the AT&T deal with the Apple iPhone. The problem with analysts is that they are seeing Dell as Apple in this deal. While that seems logical since they are the equipment manufacturer, what they are missing is who the real beneficiary of this deal is and how much it will affect their company. In the AT&T / Apple deal, Apple basically gave the keys to the mobile industry to AT&T. In this deal Baidu is basically giving the keys of the largest cell phone market in history to Dell.

Here is what Americans do not know.

The China mobile market is 900 million users. That is three times the size of America.

Baidu has a monopoly on the search engine market because Google screwed up with its relations in China. It has over 75% of the China search engine market (by revenue). No company in America can claim that type of search engine market dominance.

Baidu has created its own mobile search engine and apps that work with the android. They can leverage all those English applications PLUS one more very important fact. If there is ONE weakness in the iPhone platform it is the lack of Chinese applications. iTunes is not user-friendly to Chinese and there are very few of the most popular applications that are both in English and Chinese.

Watch for a meteoric rise for Dell. Imagine the dell tablets and future smartphones on the front page of every google search in the US. Now realize that is what is going to happen in the next few months. Baidu will be pushing more business towards Dell than any other contract in the past. This is the biggest deal in Dell’s history. It is very likely that this will help Dell break through the glass ceiling they have been butting up against for the last 10 years and put them into 2nd place, just behind Apple in total corporate value and sales.

Google is going to be kicking themselves for a decade over this fiasco. China reacted poorly to Google’s refusal to provide customer information to the Chinese government (Even after they supplied the U.S. Government with the exact same information). Since then China has been slowing down all Google traffic in China. I know. I am a user of Google and it is slower than any other search engine in China. It is because of Google’s poor decisions that the search engine market was handed to Baidu.

Apple has a great market here in China. Everyone loves the iPhone, and they are selling millions of them. The one thing that most Americans do not know is that when you look at an iPhone of a Chinese person, there are little or no added applications. The user interface of iTunes for China is a disaster. This is the open door that Dell is going to walk through. I am sure that Baidu would have preferred teaming up with Apple, but since Apple’s success they have largely ignored partnerships like this. Within a few years they will realize that they missed this opportunity.

Congratulations Dell. You have the best insight to the next decade of tablet and smartphone sales. Your stock should be one of the hot buys of this year with anticipation of the cash flow from this deal. Too bad your stock is in a country that only cares about deals in the American market. Investors have missed this deal in the same blind way that Apple and Google did.

Itia (abroad)

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