Dell announced that the company is working on a desktop computer that is slated to be 81 percent smaller than a standard mini-tower machine, while using 70 percent less energy. It also comes in recycled and recyclable packaging.

Dell, speaking Tuesday at the Fortune Brainstorm conference in California as part of Earth Day observances, said that the new machine will be the "company's smallest and most environmentally responsible consumer desktop PC."

Dell said the new system should hit the market "later this year."

Just last week, the PC maker announced that it would increase its laptop portfolio by 50 percent by the end of this year. Dell has been chasing rival Hewlett-Packard in the PC battle - both desktops and laptops -- for months now.

In January, Dell had announced it was closing its 140 retail kiosks to focus on selling from major retail outlets like Best Buy, Wal-Mart Stores and Staples. Dan Olds, an analyst at Gabriel Consulting Group, said at the time that Dell was trying to catch up to market leader HP by mimicking its channel strategy.

Jim McGregor, an analyst with In-Stat, said Dell is beginning to respond to emerging markets much better that in past years.

"I think [small form-factor computers] are a long-term trend and it deals with the quality of the experience," he added. "People don't want to hear that fan running. They don't want their PC to take up too much room. It's becoming more and more important in the market."

And McGregor noted that even though the market is increasingly moving away from desktops and full-on toward laptops, there's still call for a small desktop machine. "What I want in my kid's room and in my den and in my office are all different," he added. "What [people] want depends on the environment and what I'm going to do with it. A small form-factor desktop definitely still has a place."