Dell has been rumored to be producing a smartphone for the last two years, but CEO Michael Dell gave strong indications that the company will be entering the space soon.

"It is true that we are exploring smaller-screen devices," Dell said during a speech in Tokyo on Tuesday. "We don't have any announcements to share today, but stay tuned as, when we have new news, we will share that with you."

Dell reportedly is interested in seeing how the ecosystems develop around these devices. Apple's App Store has been a big hit for its iPhone 3G and iPod Touch platform, and it has attracted more than 800 million downloads in less than a year. Every major player will soon have a similar way of distributing mobile content, but it's unclear if they'll find the same level of success as Apple.

"For the last three years, we have integrated 3G radios into our notebooks," said Dell. "We already have agreements with many mobile carriers around netbook devices, so it wouldn't be unreasonable to expect that we would have smaller mobile Internet devices or smartphones in the future."

But Dell may have trouble gaining traction in the smartphone market, as the landscape has become increasingly crowded. Relative newcomers like Apple and Google are butting heads with established players like Samsung, Motorola, Microsoft, and Research In Motion. Additionally, Nokia is reportedly contemplating encroaching on Dell's turf by jumping into the laptop business.

CEO Dell's comments come a few days after a Kaufman Bros. analyst said a prototype Dell smartphone was sent back to the drawing board as mobile operators didn't think it was compelling enough to compete with the likes of the iPhone 3G or BlackBerry.

"From our conversations with supply chain and industry sources, it appears that it ultimately came down to lack of carrier interest," analyst Shaw Wu wrote.

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