According to a Wall Street Journal report yesterday, Dell has been developing an iPod Touch-like device, capable of accessing the internet but leaving out phone capabilities. The device could be released as early as the end of the year…or not.

The WSJ talked to a couple engineers closely involved with the project. They claimed the device would be running Android and comes in just a bit bigger than the iPod Touch. The confusion, at least as far as release is concerned, comes from this:

Another person who was briefed on the company’s plans said Dell may begin selling the device later this year, though this person said the plan could be delayed or scrapped entirely.

Delayed, okay. Scrapped entirely? Like completely do away with the project’s release date? That just doesn’t make any kind of sense. The story gets stranger.

According to the article, people at Dell have been working on the device for the past year or so, following a botched attempt to compete with Apple in the mp3 market. They wanted to what now? I realize Dell is the second largest computer manufacturer in the world (for now), but directly compete with the iPod? I don’t know who thought that would work, but that person should probably be fired. Going toe-to-toe with something as entrenched as the iPod is silly, unless you have some seriously compelling differentiators, and something tells me Dell does not.

On this new MID, people from Dell have also claimed potential plans to sell the MID through mobile carriers, and I can only think of one reason to do that: 3G capability. Unless they want to market the thing with T-Mobile/AT&T hotspots, which is totally ridiculous. Dell employees go on to say Dell is also working on a few Android based smartphones for release later in the year.

Is it just me, or is this one giant PR nightmare? You’ve got employees at all levels of the company, from engineers to folks intimately involved with release plans, spilling their guts about in-development projects that could potentially compete with the iPhone/iPod Touch and yet none of them sound coherent enough to actually believe.

Are we seeing the early onset of an upcoming death rattle from Dell? Are they trying to stay solvent as desktop sales plummet? Why don’t they have a tighter lid on this MID thing? They’ve certainly got me speculating, though I’m more worried about the company planning than interested in their new mobile device, whether it be MID, smartphone, or something else entirely. I won’t be holding my breath.