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Dell's new foray would put it into an Apple-led market that has defied challengers. Companies such as Microsoft and Sony have tried - and so far failed - to make a significant dent in the market dominated by Apple's iPod players and iTunes store.

The music player that Dell has been testing features a small navigation screen and basic button controls to scroll through music play lists, according to a report in the Wall Street Journal.

It would connect to online

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music services via a Wi-Fi connection, and Dell would likely price the model at less than $100 (£50), the newspaper claims.

Dell's first foray into the music market in 2003 was a marked failure. It withdrew from the market after its DJ Ditty player failed to make major inroads. Dell's attempt to enter the PDA market was similarly short-lived, with the company pulling its Axim handhelds a couple of years ago.

This time, if the company goes ahead with the music player, the strategy is different, according to Michael Tatelman, Dell's vice president of consumer products.

Instead of simply selling a piece of hardware tied to someone else's music service, as it did in 2003, Dell is working on software for a range of portable PCs that will let users download and organise music and movies from various online sources.

Yesterday, the company officially unveiled it's new Studio Hybrid desktop PC.