In a new report, Gartner says Poor worldwide economic conditions, low consumer confidence and a severe decline in the Chinese PDA market affected the worldwide PDA market in the second quarter of 2003, as shipments dropped 7.3 percent from the same period last year.

According to Gartner, Palm OS-based PDAs comprised 51.4 percent of worldwide PDA shipments, while Pocket PC PDAs composed 35.9 percent of total units. In terms of end-user spending, PalmSource licensees accounted for 41.0 percent of the $827 million spent on PDAs in the second quarter of 2003, compared with 47.7 percent spent on Microsoft Pocket PC PDAs. The 66 percent higher average selling price of Pocket PCs accounted for the difference between unit and dollar shares.

"It is critical for Palm to hold its ground while waiting for the launch of Palm OS 6, which is expected in early 2004," said Todd Kort, principal analyst for Gartner's Computing Platforms Worldwide group. "OS 6 should put Palm on more even footing with Microsoft as wireless PDAs gain acceptance in enterprises in 2004."

Gartner said in the overall PDA market, the second quarter is traditionally slow, however, Palm, Inc. experienced a 15.3 percent increase in shipments from a year ago, and it held onto the top spot in the worldwide rankings with 38 percent of PDA shipments. Hewlett-Packard remained in the No. 2 position with 15.3 percent of the market, even though shipments were down 10 percent. Research in Motion moved into the top 5 worldwide with market share of 5.3 percent, up from 2.1 percent a year ago.

"The Palm Zire 71 was by far the best-selling PDA on the market, and the new Tungsten C was also well received, which helped Palm maintain its solid leadership position" Kort said. "While HP's shipments were down, a good portion of their decline is attributable to shipments cutbacks in anticipation of the launch of five new models following the introduction of Microsoft's Windows Mobile 2003 operating system on June 23."

Palm still sits atop the U.S. PDA market with a 46.7 percent market share, while Sony remained No. 2 with 12.1 percent market share . Sony maintains an aggressive PDA development program, but Gartner analysts said Sony has been impacted by the Palm Zire 71, which has helped Palm stem the tide of customer defections to Sony.

"Research in Motion (RIM) also had an excellent quarter in the United States, growing 128 percent," Kort said. "RIM has introduced several new models that provide an incentive for subscribers to upgrade from older Mobitex-based units to models based on GSM/GPRS (Global System for Mobile Communications/general packet radio service) or CDMA 1x. RIM is rapidly expanding its presence outside North America and more deeply penetrating existing accounts."