Palm Shareholders OK a Marriage of Desperation

One buy-side vote of confidence comes from LaForge of Phoenix-Hollister, who says his fund definitely plans to retain its PalmSource shares following the spinoff.

Palm still owns the lion's share of the operating system for PDAs, with an estimated 54% of the market this year, down from 58% in 2002. But Microsoft is gaining on it: IDC estimates the software giant will wrap up 2003 with 28% share, a rise from 23% a year ago.

"The Palm OS continues to be the most important and still dominates the handheld market in general. But that said, it's a market that really hasn't seen any unit growth over last few years," says James Faucette, an analyst for Pacific Crest. He has a neutral rating on Palm; his firm hasn't banked for the company.

Meanwhile, in the market for handhelds with voice capabilities, Palm's share is expected to fall behind Microsoft this year. The two are projected to claim a respective 13% and 14% of the space in 2003.