Dellephone?

After roughly two years of rumor and speculation, a Dell smartphone is moving “closer to reality.” So says Kaufman Brothers analyst Shaw Wu, who believes the company may uncrate a mobile handset at 3GSM or the Mobile World Congress event in Barcelona in February. Wu writes, “From our supply chain checks, Dell has been studying the cellphone market and talking with component suppliers and manufacturers for nearly two years now.”

Seems Dell’s new Global Consumer division–led by Motorola’s (MOT) former mobile device head, Ron Garriques–has been busy this past year.

“The exact timing of Dell’s launch is not clear but our sources indicate it is closer to reality than before,” explains Wu. “We believe it is likely inevitable that Dell enter the cellphone space given the cannibalization of PCs by smartphones and highly functional mobile devices.”

For Dell (DELL), which Wu describes as “in the midst of an identity crisis,” a move into the smartphone market may be a risky bet. As Apple (AAPL) has shown us, the handset space thrives on innovation–something for which Dell isn’t exactly known. And now, with the advent of the Palm Pre (PALM) and Google’s (GOOG) Android, not to mention the continuing dominance of RIM’s (RIMM) iconic BlackBerry, it’s more crowded and competitive than ever. That said, Dell may have no choice but to enter it.

Says Wu, “Perhaps the tough macroeconomic environment buys the company some time, but we believe Dell needs to send a stronger message to its customers and investors by taking bigger and bolder steps than it has done so far. Entering the cellphone market could be the catalyst, but we believe it needs to be careful in its strategy as the cellphone market is similar to the PC market where most devices are low margin commodities and the winners are vendors with very differentiated products.”