They all got hit Wednesday, all the personal digital assistant, or PDA, producers. Bad. But it was Palm (PALM:Nasdaq - news - boards) that got hit worst ... and deserved it.

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On Wednesday, Palm closed down 48%, to $8.12. Handspring (HAND:Nasdaq - news - boards) was down 33%, to $10.88. The Canadian outfit, Research In Motion (RIMM:Nasdaq - news - boards), which makes the RIM text pagers often used as PDAs, was trimmed 18%, to $20.25.

The notion that before long everyone's going to be using a PDA -- our Filofaxes and Letts and DayTimers and other relics of the paper appointment-book world tossed in some forgotten corner -- took a hit too.

What happened? Could we have seen this coming?

If you want to find a villain here, look at Handspring. It's been far more aggressive, and far more effective, one-upping Palm ever since its founders, Donna Dubinsky and Jeff Hawkins, left 3Com (COMS:Nasdaq - news - boards) three years ago to start over again in the PDA business. They invented the Palm; they sold their struggling business to modem-maker US Robotics; Robotics was sold to 3Com; 3Com's then-CEO Eric Benhamou refused to spin out the Palm business when Dubinsky and Hawkins grew restless; they left. They left with a license to use the Palm operating system they'd developed when they invented the Palm hardware. And with blood in their eyes to beat slow-moving Palm at its own game.

And they did exactly that.

The smaller, thinner, more elegant, more versatile, more useful Handspring Visor and its successors have consistently topped Palm's nice, but less exciting, offerings. Palm responded with classic too-little/too-late machines, didn't respond to users' demands for operating system, or OS, improvements, expandability and more ... and despite current market share and sales numbers, has essentially lost the game. To Handspring.

Dead-man walking.

So Palm says the other day that whatever happens on the hardware front, it's going to make big bucks licensing its operating system to the likes of ... Handspring. Yes, yes, Sony and a very few others, such as cell-phone makers, have also licensed the Palm OS, but that's going nowhere.

Even Jeff Hawkins, the creator of the Palm OS, said in an interview published last week that Handspring expects to use another OS in its next-generation units. He tried to walk the line carefully, to be prudent ... but it was clear that Handspring's as tired of Palm's foot-dragging as are Palm users and other licensees.

There is essentially no money for Palm in OS licensing fees. It's a dead-end business. Indeed, given Palm's dominant position in the PDA hardware market, every sale of a Palm-compatible device by a competitor is in effect a net loss for Palm, even given the very small license fee that accrues from such a sale.

Then this week Palm guides revenue forecasts for the current quarter down to $300 million-$315 million from the $570 million the Street had been expecting. Whoa there. Big change. BIG. Bad news.

And Palm, with ballooning inventory as well, announces it's letting employees go, both permanent and contract, and it's delaying work on its new headquarters.

That wall of inventory out there is absolutely critical in the consumer electronics business, where the obsolescence clock starts ticking the minute you ship a new product. Palm has got to keep moving its current users up the ladder to new models, while continuing to draw substantial numbers of new users.

Its ability to do either is now at peril. And being openly questioned on the Street.

I said Handspring was the real villain here, if villain-ology makes any sense in this case. Yes ... but you also have to understand the chess game that's been going on behind the scenes for the past month or so.

Two weeks ago, Handspring launched the sure-to-be-hot Visor Edge, a thin, elegant alternative to Palm's long-in-the-tooth Palm Vx, the best-selling, biggest-margin product Palm has.

In response, a week ago Palm moved up the announcement of its new m500 (monochrome) and m505 (color) models, the successors to the Vx. The m505 even has a Handspring-like Springboard-like expansion slot on the back (but incompatible, of course).

Both new Palms are expected to dribble on to the market by mid-to-late April, and be available in quantity in May.

Palm also cut the price on the Vx, assuring analysts that at $349, as opposed to the $399 and $449 of the new models, it would still draw plenty of buyers and keep up revenue for Palm during the product transition.

Hah. No way.

Palm clearly was not ready to announce or ship the m500-series units, and it equally clearly had not planned to cut Palm Vx prices so soon. But with the Handspring's new Visor Edge out there, listing at $399 direct from Handspring's Web site and appearing now in the usual retail channels, Palm had little choice. (Handspring also has its Visor Prism color unit at $449, and Visor Platinum, at $299.)

Handspring's final trump card was the announcement Tuesday of its new distribution deal with Ingram Micro (IM:NYSE - news - boards), which puts Visors in the hands of selected dealers that have clout in corporate America. Until recently, Palm was the dominant PDA in businesses; Handspring was the suspect outsider. Looks as if that may change.

In the end, of course, Handspring hasn't been a villain at all, simply a good and aggressive competitor. Palm has been bumping along as if this were 1972, as if speed, innovation and flexibility were options.

And Research In Motion? Still a distinct niche player, with a tiny market share. I love RIM's text-messaging pagers, and they have a lot of other fans, but they'll never be part of the mainstream.

The investability consequences? After Wednesday's haircuts, I wouldn't touch Palm for a long time. It has way too many problems and has demonstrated little ability to deal with them. RIM's also too much of a long shot for me.

What about Handspring? I think it can regain its recent stock price in the teens, but not overnight. And that long honeymoon it enjoyed after the first of the year, in the mid-$40s, is a distant memory. I think it's not going back there anytime soon.

The PDA marketplace has been swept by wave after wave of enthusiast boosterism. Yes, the best of these little gizmos are handy, but until they have built-in wireless connectivity without a major size, weight or cost penalty, they're not going to realize their potential, either for users or as an investment. And that's not coming this year. And probably not next.

There are also waaaaay too many PDAs sitting in bottom drawers, unused. Wednesday morning, CNBC "Squawk Box" host Mark Haines and "Brain" David Faber were commiserating on air about their unused PDAs, neither of which they'd been able to figure out how to use. I get lots of letters from would-be PDA users -- and often, recent buyers -- in the same vein: These things, readers say, still don't do enough, and they take too much time to learn and set up.

I like the new Visor Edge, and I'll probably get one soon enough. But I fear it will join my H-P Jornada, Casio Casiopeia, RIM Blackberry and Palm III in that bottom drawer I think of as the last resting place of expensive but transient enthusiasms.