Compaq is expected to report revenue of more than $US200 million from its iPaq handheld PC line in the second quarter, ending 30 June, while Palm's hardware revenue is projected at $US130 million to $US135 million for its fiscal fourth quarter, which ended 1 June, Dataquest said in a statement Monday.
Palm still leads in the number of units sold, but iPaq's much higher average selling price gives the company a revenue edge, the study concluded.
Taking third place in the market is Handspring which recently projected revenue in the $US60 million to $US65 million range for its fiscal fourth quarter, ending 30 June.
The iPaq, which runs Microsoft Windows CE operating system for the Pocket PC, is gaining popularity with business users, especially due to its better wireless messaging capabilities, Dataquest said. Palm has fallen behind in innovation in this area, where users are demanding such services as access to corporate e-mail, SMS (short message service), WLAN (wireless local area network), or integration of a PDA with a mobile phone.
Palm has offered few improvements to its Palm OS software since the company split with its former parent 3Com Inc. last year, allowing Microsoft to catch up with its Windows CE 3.0, the researchers said.
Palm rejected the implication that it is losing its edge. "The installed base of Palm devices is 13 million, in comparison to 1 million Pocket PCs," said spokeswoman Lorraine Legros. "Compaq is doing very well, but there's some catching up to be done."
She added that services such as SMS and e-mail are already possible with the Palm OS 3.5 release, using an infra-red modem and a mobile phone.
"To be honest, we think the consumers are continuing to vote for our devices," Legros said, adding that the company's two new handheld models, m500 and m505, "have been really well received in markets around the world." The devices, introduced in March, include an expansion slot that will allow users to add memory and software, and eventually hardware such as a wireless modem or a digital camera.
Compaq declined to comment on the Dataquest report. The company is in a "quiet period" before issuing its quarterly earnings report, due in early July, said spokeswoman Lucy Moore.
Microsoft's planned successor to Windows CE, code named "Talisker," is due at the end of this year, giving the company a chance to solidify its lead with corporate users.