After years at the top of the PDA pile, Palm seems to be losing its touch. In the face of mounting competition from the now sensibly priced and high powered Pocket PC devices, it seems the pioneer of the handheld market is finding things tough going. Revenue has fallen sharply compared to last year and the company has been forced to report a net loss of $17mn.

It has also announced the delay of a planned spinoff of its PalmSource software division. According to Palm, splitting the two halves of the company has taken longer than anticipated and is now expected to take place some time in the middle of the year.

The problems arise from poor sales of its high cost GPRS-enabled (general packet radio service)
Tungsten W model, which has yet to launch over here but sells for $549 (£350) in the States.

Despite a price cut of $100 in the US, sales of the Tungsten T also remain unimpressive. This is perhaps because of increased competition from cheaper Pocket PC devices such as Dell's Axim, which sells for just under £200. The Palm Tungsten T sells for closer to £300.

The financial situation at Palm looks set to get worse before it gets better. Palm expects fourth-quarter revenue to be between $185 million and $200 million, down 15 to 20 percent year on year. New handhelds will come out in the spring but since that will be in the middle of the company's fourth quarter it will probably have limited impact on its financial results.