With several vendors abandoning the Windows CE palm-size PC market - and with electronics giant Sony signing up to use Palm Computing's platform - Microsoft appears to be losing the battle of the hand-helds.

At Comdex last week, Sony announced its plan to license the Palm Operating System for its consumer handheld devices. OmniSkyin, demonstrated its wireless Internet service for users of the Palm V, which will debut early next year. More than a dozen vendors showed hardware, software and information services for the Palm platform at Palm Computing's Comdex booth.

Other recent high-profile wins for Palm include Nokia's decision last month to jointly develop cellular phones based on the Palm operating system. Vendors such as Handspring and TRG Products have also launched Palm operating system devices.

Meanwhile, Windows CE is falling behind.

Market research firm The NPD Group reports that 3Com, parent company of Palm Computing, held 78 per cent of the US market for personal digital assistants (PDA) in the third quarter, up from 76 per cent the same period a year ago. Devices running Windows CE fell to 15 per cent of the market, down from 22 per cent the year before.

The CE platform has been hit by some high-profile desertions, with Royal Philips Electronics in the Netherlands and Everex Systems abandoning the palm-size PC market.

Those desertions don't weaken the Windows CE platform, said Brian Shafer, marketing manager at Microsoft's productivity appliances division. "Between Compaq, Casio and Hewlett-Packard, we feel we have fairly good coverage," he said.

Windows CE devices have been hobbled by limited battery life and an operating system that isn't simple and stable enough, said Jill House, an analyst at International Data.

"I've had the Windows CE devices, and they're terrible," said Harko Schwartz, president of systems integrator NCME, who now owns a Palm device. He said he could lose valuable customer information when a CE device's batteries run out.

However, corporations eager to develop complex applications for handheld devices may opt for CE's richer platform and popular development tools such as Visual Basic, said House. And Windows CE might see a revival if users start demanding multimedia capabilities and better Internet access, she said.

An update to Windows CE, expected in the first half of next year, is likely to help the platform, Hayden said. It will feature enhancements for the real-time and embedded markets, an area in which CE's fortunes seem brighter.

CE also is the operating system for subnotebook devices from vendors like Compaq, as well as for the Web Companion, the low-price Internet access device Microsoft CEO Bill Gates introduced in his keynote last week.

"Palm OS is a great, efficient OS for an organizer. As soon as you want to do more, like browsing, it loses steam, and CE really shines," said Shafer.

But in a panel discussion at Comdex last week, Palm Computing President Alan Kessler suggested that simplicity is a virtue. "The success of the Palm was not in what we put into the device," he said, "but in what we left out."

Many users are starting to look beyond the Palm's basic organizer features. At Internet security firm Hyperon Consulting, one employee bought a Palm about a year ago, and "it took the company by storm," said William Molini, director of sales. At Comdex, Molini was looking at software from Walletware that would allow mobile workers to file their expense reports from their Palms while they're on the road.

Wisconsin Public Service currently has users of multiple handheld systems, but the information technology department isn't supporting any of them, said Steve Mitchell, a senior systems analyst at the utility in Green Bay. The company is telling employees to contact IT before acquiring a PDA, but it hasn't yet decided whether it will go with Palm or Windows CE. "We don't want to support multiple platforms," Mitchell said.