In a searing indictment of Palm, market research firm Dataquest claimed Monday that Compaq's iPAQ line of handhelds will overtake Palm in the current quarter if you count sales dollars and not unit sales. The research firm blames Palm's inferior high-end technology.

Dataquest projects worldwide iPAQ sales to be more than $200 million in the quarter ending June 30. Palm recently lowered its estimates for the quarter to between $130 and $135 million. Handspring's recently lowered estimates call for sales of between $60 and $65 million. Handspring's handhelds are based on the Palm OS.

The difference is the significantly higher selling price of iPAQs compared to Palm-based devices, Dataquest noted. Like all Pocket PC devices, iPAQs typically have far more RAM and true-color screens while Palm devices typically have less RAM and grayscale screens.

"A growing portion of new users and users who are upgrading want better messaging capabilities, such as access to corporate e-mail, short message services (SMS), wireless LAN (WLAN) or integration of a PDA with a mobile phone," said Todd Kort, principal analyst of Gartner Dataquest's Computing Platform Worldwide group. "Palm has little to offer such companies ... and this lack of innovation is a big contributor to its declining fortunes."

The overall marketplace is swinging to high-end devices based on Microsoft's Windows CE, of which Pocket PC is a variant, Gartner said.

"The corporate market is slowly swinging toward devices running Windows CE because of its smoother functioning with Outlook and Office applications," said Ken Dulaney, vice president and research director for Gartner's Mobile Business Strategies program.

Palm both needs to replace its current Palm VIIx, which should occur in the second half of this year, and offer a high-end device based on a new, more technically competitive operating system, Gartner said.

Gartner also said Palm must restructure to split its hardware and software operations.

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