Notebook sales may be on the up, but not all forms of portable computing are faring so well according to IT analyst Gartner which announced a slump in the PDA market, with a decline of 3.5 percent since 2001. But the really bad news is for makers of Palm-based handhelds, as Gartner anticipates that they will lose ground to devices running Microsoft's Pocket PC operating system.

In the short term, Gartner analyst Tom Kort believes that "Palm may get a lift from its OS 5-based PDAs [personal digital assistants]". But these devices aren't due out until around October, which means they could miss the lucrative 'back to school' market, having to wait until sales pick up for Christmas.

The boost provided by the release of Palm OS 5 may also be tempered by the fact that while the devices may be out towards the end of this year, there are unlikely to be any native Palm OS 5 applications released until 2003.

Kort believes that cost is a key concern in this market, and that it will be those vendors offering low-priced solutions that ride out the slump. But he warns that some potential customers may wait to get their hands on Dell's budget PDA, which is rumoured to be slated for release in November, rather than opt for other devices. Kort says that as Dell is unlikely to be able to meet initial demand for the handhelds, customers may put off buying until Dell devices are available rather than go with other vendors.

Dell's PDA is likely to be based on the Pocket PC operating system, which Gartner believes is set to steal Palm's crown as the leading PDA OS. The reason for this is that handhelds are moving to the core of corporate IT structures, and Microsoft "has been adept in providing the building blocks enterprises require", according to Kort. This, he believes, heralds the beginning of a gradual shift away from Palm and towards Microsoft as Gartner says most companies it speaks with "are moving with, or planning to move with, the Microsoft wave".

Whether this shift will be reflected in the consumer space is less clear. But perhaps we will see a split similar to that in the notebook PC arena where there are two distinct markets — low-cost desktop replacements favoured by consumers and more expensive, portable PCs aimed at businesses.

PDAs could develop into two separate sectors: basic handheld organisers, possibly with mobile phone facilities built in (such as the Handspring Treo and the Xda (pictured), aimed at consumers) and more complex Pocket PCs which, as the operating system suggests, are like mini-notebooks with wireless capabilities and a wider range of applications for business customers.

PC Advisor will be sure to follow developments in this market, particularly with a several devices due for launch towards the end of the year and a Technofile feature devoted to handhelds, planned for our December 02 issue due out at the end of October.