Dell Computer (NASDAQ: DELL), usually late to market with new products such as handsets and netbooks, will challenge Apple Inc. (NASDAQ: AAPL) with a new tablet PC. It is called the Streak. The fist version of the product will have a 5-inch screen, but a 1o- inch version will be offered later this year.

The Streak, which will work on 3G networks, will be available in Europe this week and in the US this summer. The product will use a Qualcomm (NASDAQ: QCOM) 1-gig processor.

Dell has rejected Microsoft (NASDAQ: MSFT) Windows, the operating system on almost all the PCs that it sells, in favor of using Google’s (NASDAQ: GOOG) Android OS for the Streak. Android has enjoyed very rapid adoption on handsets and may challenge the market share of the Apple mobile OS and RIM OS for its BlackBerry.

Android is an open source platform, which means that Dell or developers can create a multitude of applications for the hardware such as GPS, Google’s inexpensive Apps software, and e-book downloads. It will compete with the Amazon (NASDAQ: AMZN) Kindle and Barnes & Noble (NYSE: BKS) Nook as much as the Apple iPad.

Dell faces the problem of how many tablets and e-readers are too many tablets and e-readers. Apple sold more than one million iPads its first month on the market. Amazon has sold over two million Kindles. And, the Apple App Store has nearly 200,000 applications. Android has not reached 50,000.

Dell may also face competition from Hewlett-Packard (NYSE: HPQ), its arch-rival, which has hinted it may launch a Android-based tablet of its own.

Dell will not only have to contend with fierce competition. It will have to decide if it will become the low-priced alternative in the market to pick up share. The PC company was harshly criticized for the falling gross margins in its last quarter. The pricing of the Streak could make that problem worse.

Douglas A. McIntyre

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