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Microsoft closing in on PalmSource

In the race for market share, Microsoft and PalmSource finish the first quarter neck and neck, as the handheld specialist loses substantial share and the software giant makes some gains.

The first quarter of 2004 saw Microsoft heading for an all-out assault on PalmSource in the global market for handheld operating systems.

PalmSource, the market leader, closed the quarter with a whopping 20.7 percent drop in market share, according to initial data released Friday by research firm Gartner.

The drop comes as global handheld devices shipments slumped by 4.6 percent, according to Gartner.

Gartner's report found that the market share held by Palm's operating system slipped to 40.7 percent, while the Windows CE market share grew by 5 percent to 40.2 percent. Microsoft licensees have been steadily chipping away at the Palm OS lead since 2000, when Microsoft accounted for 11 percent of the market for handhelds.

"The decline in Palm OS market share in the first quarter of 2004 is not unexpected, because many Palm OS users have delayed PDA purchases until they can evaluate PalmSource's upcoming operating system, Cobalt," said a statement from Todd Kort, a principal analyst with Gartner. Cobalt is being positioned as an OS suitable for a wider range of cell phones and other wireless devices, apart from PDAs (personal digital assistants).

Microsoft's bundling of Outlook with Pocket PCs and its acceptance among enterprise application developers have also worked against Palm, Kort said.

Another highlight of the quarter was the spectacular 352.5 percent growth achieved by Research In Motion, which saw its market share jump from 3.1 percent in the first quarter of last year to 14.8 percent this quarter. RIM's BlackBerry initially launched mainly as an e-mail device, but it now offers cellular service as well.

"In the last nine months, there has been tremendous growth in the use of RIM BlackBerry devices. Given the number of e-mail messages sent or received each day by mobile professionals, it makes sense for many of them to have a pocket wireless device that can be used to keep up with e-mail," Kort said.