Pocket PC Launch Byting the Palm

If U.S. hand-held computer and software maker Palm Inc. ever had any doubts about the strength of its competition, last week’s blitz by Microsoft to launch its rival Pocket PC 2002 software did away with them.

At the launch of Pocket PC 2002, which at its core is the third version of the 4-year-old hand-held computer software, Microsoft never even mentioned market leader Palm. Microsoft has a modest 20% market share compared with Palm’s 56%.

Industry analysts say Microsoft has newfound momentum, helped by new software and 15 new and improved devices by partners such as Compaq, Hewlett-Packard, Toshiba and Casio.

“The new Pocket PC will help Microsoft gain market share,” said Chris Jones at research group Canalys, which tracks the mobile computing market.

Palm has only three hardware makers in its corner--Handspring Inc., IBM Corp. and Sony Corp.

Research group IDC expects that Pocket PC will climb to a market share of more than 30% next year. The market as a whole is set to triple in four years to $6.6 billion, or more than 60 million units, IDC estimates.

In the last six years, Palm has single-handedly created a market for screen-only computers, but now it has to fend off criticism that it cannot equal some of Pocket PC’s new features.

What grabbed analysts’ attention was Pocket PC’s ability to build a virtual private network, or VPN, over the wireless Internet connected with corporate computers, which lets staff securely access company e-mail and Web pages.

Palm said it is testing its own VPN application but could not say when it would be available.