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When it comes to handhelds,


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in the third quarter raised its arms in victory, a new report says.

For the first time, the company's operating system for personal digital assistants took the lead in handheld shipments, according to a study by research firm Gartner. PDAs running Microsoft's Windows CE operating system accounted for nearly 50% of the market, outpacing those running the Palm OS, which has long dominated PDA sales.

"A decline in Palm OS shipments was expected in the third quarter of 2004, but not of this magnitude," Todd Kort, principal analyst in Gartner's Computing Platforms Worldwide group, said in a statement.

Kort attributed Palm OS's precipitous fall to



focus on the smartphone market.

Smartphone shipments were not included in Gartner's study. After


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decision in June to largely abandon the handheld market, palmOne became the primary licensee of the Palm OS.

Many Hands in the Pot

"The robust Microsoft Windows CE market has been driven in part by the wide choice of vendors," Kort said in the statement. "Business customers tend to steer clear of markets dominated by a single supplier, which is where the Palm OS market stands today."

The report comes as the handheld market has largely stagnated, with analysts and investors

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questioning its long-term future.

Gartner's study is also further bad news for palmOne's erstwhile sibling



, which licenses the Palm OS. The company has been reeling lately, not only from Sony's departure from the market, but also from rumors that palmOne might start developing smartphones or handhelds based on Microsoft's operating system.

palmOne has a nonexclusive relationship with PalmSource even though its devices to date have run the Palm OS. But a

recent agreement to license Microsoft's email client for its devices helped fuel the speculation about palmOne and Windows.

In the third quarter, Windows CE licensees shipped 1.38 million units, accounting for 48.1% of the handheld market, according to Gartner. Those numbers were up from the year-ago period, when Windows CE device makers shipped 1.04 million units and held 41.2% of the market.

Among individual Windows CE licensees,


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was the biggest gainer, according to the report. The company's shipments increased to 692,113 in the quarter, from 578,500 in the third quarter last year. Meanwhile, the company's market share increased to 24.2% from 23% a year ago.



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also posted gains in shipments and market share, according to Gartner. The company, which just recently launched a new line of high-powered handhelds, saw its shipments increase to 185,300 in the just-completed quarter from 134,813 in the year-ago period. The company's share of the market rose to 6.5% from 5.4% in the third quarter last year.

Forward Motion

But Microsoft and its licensees were not the biggest winners in the handheld market, according to the report. That title belonged to

Research In Motion


. The maker of email devices and software shipped 565,000 of its BlackBerry handhelds in the quarter, taking 19.8% of the PDA market, both from an OS and device-maker perspective. In the year-ago quarter, RIM shipped 123,775 handhelds and had about 4.9% of the market, according to Gartner.

In contrast, the Palm OS was the biggest market share loser among operating systems. Shipments of PDAs running the operating system fell to 850,821 units in the third quarter, down from 1.18 million in the year-ago period. The Palm OS's share of the market fell to 29.8% from 46.9%.

As the largest Palm OS licensee, palmOne was one of the biggest market-share losers among device makers. The company's share of the market dropped to 26.2% from 34.3% a year ago, as its shipments fell to 748,950 units from 863,993 in the third quarter last year.

But the Palm OS and its licensees weren't alone in giving up share. Linux's share of the handheld operating system market fell to just 0.9% in the third quarter from 1.9% a year earlier, as shipments declined to 24,500 from 48,550. Like Sony,


, the primary maker of Linux handhelds, has largely abandoned the handheld market.

Gartner's report postdates a

similar one from IDC last month. At first glance, the two reports seemed to reach opposite conclusions on the health of the PDA market, with Gartner showing an overall gain in shipments and IDC reporting a decline. But IDC's numbers don't include shipments of BlackBerry devices or similar PDAs that are sold by wireless carriers.

Despite this difference, both reports concurred on the general direction of shipments of Palm OS-based PDAs vs. those running Windows CE.