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Earlier this year, Dell was testing prototypes of a mini MP3 player based on entertainment software called Zing, for an expected autumn release.

The player was expected to retail for around £50, providing stiff price competition to the market-leading iPod.

However, the company has decided to hold off on the music player indefinitely but to proceed with the Zing software,

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according to the Wall Street Journal. The Zing software organises downloaded music and movies on PCs, and provides links to various online music store.

Dell made an aborted attempt to join the MP3 player market in 2003, with its DJ Ditty device. The product failed to take off and Dell returned to its core PC product lines.

The company's decision to abort this latest MP3 venture may have more to do with the company's perilous finances.

Last week, Dell asked employees to take unpaid leave in a bid to cut costs.

The company is nearing the end of program that has seen it shed 8,900 jobs and has implemented a global hiring freeze.

Dell was recently relegated into a distant third place in European PC sales, having arrived late into the burgeoning netbook market.