With Microsoft nearly ready to unleash the Zune HD on the masses, now Dell is working on a device to compete with the iPod Touch, according to reports. The device will play music and videos just like the iPod Touch, but will be based on the Google Android mobile OS and also function as a MID.

In size it will likely be slightly larger than the Touch. The device needs to compete with not only the Touch, but also with the Zune HD. It will be interesting to see what features end up in the device and whether it ends up being a true competitor or falls short.

[Gizmowatch]