Microsoft is looking at making its best-selling Office applications, such as Word and Excel, into Palm applications. This is a nod in very un-Microsoft fashion to Palm’s dominance in the minds and handbags of consumers.

Palm’s machines and their clones, from companies such as Handspring, currently access Microsoft applications using emulation software from the likes of DataViz.

"No offense to the Pocket PC, but we might need to bring .Net services to Palm and other [handheld] devices," said Microsoft chief executive Steve Ballmer during a conference yesterday.

Microsoft doesn't plan to turn away from the Pocket PC technology, but Palm has more “marketing position” than Microsoft currently does in the handheld business, Ballmer explained.

Embracing the rival Palm devices would be "a logical business strategy" for Microsoft, said Tom Austin, analyst with research firm Gartner Group "Microsoft might have been [hoping], 'If we close our eyes, Palm will go away,' but in this case, they haven't.”

Microsoft provides applications for operating systems other than its own variants of Windows, most notably Apple’s Mac OS. More than seven million Palm devices are in use, representing a more than 70 percent share of the handheld market, according to Gartner estimates. Meanwhile the Pocket PC and Microsoft's older Handheld PC technology have a combined a market share of only around 15 percent.