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Microsoft grabs lead in handheld market

Handhelds that use Windows CE hold 48 percent of the market share worldwide, up from 41 percent a year ago. What's Palm to do?

Microsoft has a firm grip on the handheld software market, winning the lead in shipments for the first time, a new report from Gartner shows.

Shipments of handhelds that use Microsoft's Windows CE operating system rose by about 33 percent to about 1.4 million in the third quarter, compared with the same period last year. Meanwhile, shipments of handhelds that use the Palm operating system shrank by 26 percent to 851,000. Research In Motion showed huge growth, with shipments jumping more than 356 percent to 565,000 to round out the top three, the research company said.


What's new:
Shipments of handhelds using Microsoft's Windows CE operating system rose 33 percent in the third quarter.

Bottom line:
Business customers tend to steer clear of markets dominated by a single supplier, some analysts say. While Palm still holds the largest share of the PDA market, Microsoft is gaining ground.

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The shipment figures gave Windows CE a 48 percent market share worldwide, up from 41 percent a year ago. PalmSource's Palm OS held 30 percent, down from 47 percent a year ago.

Overall, worldwide handheld shipments rose by almost 14 percent from a year ago, totaling nearly 2.9 million during the third quarter, according to Gartner. The figures include wireless handhelds from Hewlett-Packard and Research In Motion but exclude so-called smart phones.

A wide choice of manufacturers, including HP and Dell, helped Microsoft, Gartner said.

"Business customers tend to steer clear of markets dominated by a single supplier, which is where the Palm OS market stands today," Todd Kort, a Gartner analyst, said in a statement.

Microsoft has been closing in on Palm OS for some time, but Gartner said the size of the third-quarter decline in Palm OS shipments was larger than expected.

Still, PalmOne, the largest manufacturer of Palm OS handhelds, gets the consolation prize. Although its shipments declined by about 13 percent to 749,000, PalmOne maintained the largest share of the PDA market--about 26 percent.

The Milpitas, Calif.-based company has been looking to grow its market share and cut manufacturing costs by testing other operating systems, including versions of Linux and Microsoft, for use in its handhelds, according to sources.

No. 2 HP's shipments grew by nearly 20 percent to just over 692,000, giving it about 24 percent of the market. RIM's 565,000 ranked it third with almost 20 percent market share.

The gains by Research In Motion balance the declines by Palm OS, Linux, Symbian and other operating systems, Gartner said. Thus, Gartner predicts, worldwide PDA shipments will total 11.9 million for 2004, an increase of about 4 percent over 2003, Kort said.