Sources say Dell has been working on an iPhone-like touchscreen smartphone for over a year

The economy is down meaning that sales of computers and other technology items like high-end TVs have slowed greatly. The slow sales of computers have hurt many firms in the technology world from the computer maker to the suppliers of the components inside the machines.

While the computer industry is shrinking, the smartphone market has continued to grow as more people look to their phones to offer some of the same functionality that they are used to seeing on a PC like internet access.

Dell has been rumored to enter into the smartphone market for a while now and according to The Wall Street Journal (WSJ), sources say Dell's first smartphone could launch as early as next month. Dell reportedly has had engineers working on phones in a Chicago office under a veil of secrecy for over a year.

Dell reportedly even kept many managers and executives in the dark about its phone operations. WSJ sources claim that Dell will focus exclusively on the booming smartphone market, a niche that is currently owned by the Apple iPhone. One device is said to use a touch screen and an onscreen keyboard like the iPhone and another is said to be a slider with a keyboard underneath.

Dell reportedly has yet to finalize its plans and could opt to back out of the phone market altogether. If the computer maker opted to back out of the smartphone market after spending time and money to develop the product, it wouldn’t be the first time the firm has done so.

Dell may see the smartphone market as a way to bolster its business during one of the worst times in the technology market in years. Dell has seen profits shrink in the face of reduced consumer spending and has lost its spot at the top of the computer maker charts.

According to IDC, Dell lost market share last quarter falling to 13.7% of the computer market. Revenues for the same period dropped 3% and profits slipped 5%. Dell hired a former Motorola executive named Ron Garriques from Motorola in 2007. Garriques has been under a non-compete agreement that prevented him from working on phones for Dell since his hiring. The non-compete agreement expires next month adding fuel to the speculation flames.

IDC reports that in 2008 157 million smartphones were sold globally, up 26.9% compared to 2007. Smartphone shipments are expected to continue with robust growth with predictions claiming 301 million units will be sold by 2012.

May PC makers are also in the smartphone market including Asus and Apple. Dell rival Acer is also set to enter the smartphone market with a launch of an unnamed smartphone set for next month at the GSMA Mobile World Congress.

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