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Dell (NASDAQ: DELL - news) disclosed on Monday that it is preparing to enter the smartphone business, adding to the escalating competition as mobile handset and computer makers converge on one of the only parts of the personal technology market still showing strong growth and profits.

Confirmation of Dell's long-rumoured intentions in the mobile market came as China Mobile (0941.HK - news) showed off a model of a Dell smartphone running Google (NASDAQ: GOOG - news) 's Android operating system.

Dell described the handset as a "proof-of-concept prototype" and said that the company was working with the Chinese mobile operator on launch plans. Dell did not disclose further details or timing.

Founder Michael Dell once ruled out the prospect that his company, now the world's second-largest PC maker, would ever enter the mobile handset business, arguing that profit margins were too slim and that Nokia (Xetra: 870737 - news) , with 40 per cent of the business, represented too tough a competitor.

Since then, however, the success of Apple (NASDAQ: AAPL - news) 's touchscreen iPhone has provoked a stampede by other makers of personal technology and forced Dell to rethink.

"With the iPhone, Apple brought a lot of new people to the brand, and captured some of the highest margins in the industry," said Rob Enderle, a US tech industry analyst. With sales of PCs and traditional mobile handsets falling in the first half of this year, that has made smartphones one of the few bright spots.

Dell's attempt to break into smartphones also reflects a defensive move to protect its PC business, since it could be vulnerable if it does not sell a full range of personal computing devices, according to analysts. The US company has already launched netbooks - low-priced, small-scale PCs that have become another hot area of personal technology.

"If you don't have an offering in a particular area, you invite a flanking move by your rivals," said Roger Kay, a PC industry analyst.

Besides China Mobile, Dell has already forged alliances with AT&T in the US and Vodafone (LSE: VOD.L - news) and TeliaSonera (Stockholm: TLSN.ST - news) in Europe to sell netbooks. Putting a smartphone alongside these devices would add to the range of gadgets it sells through mobile operators.

However, Dell abandoned a similar move into consumer technology when it scrapped its digital music player after failing to find a market.