The move affects Compaq's H3765 model, which uses the same hardware as Compaq's last-generation iPaq but includes the new Pocket PC 2002 operating system introduced by Microsoft in October. With the rebate, the unit now sells for $449.
The move is the first discount for a handheld running Pocket PC 2002, but is the latest in a series of price drops in the handheld market.
The offer starts Sunday and runs through March 30.
On Thursday, Palm chopped $50 off the price of its mid-range m125 handheld. In the Pocket PC realm, HP's older Jornada 525, which is not upgradeable to Pocket PC 2002, has been selling at under $200 as the PC maker looks to clear out the older product.