Will Microsoft dominate handhelds, too?

COMMENTARY--Those of us who cover technology for a living spill a lot of ink on Pocket PCs because, well. . . because they're pretty cool gadgets. But the fact is, they are still a distant second to PDAs based on the Palm OS. Together Palm and Handspring account for more than 80 percent of the 1.9 million handhelds sold so far this year; Casio, Hewlett-Packard, and Compaq (in that order) combined for a growing, but still relatively small, 12 percent, according to NPD Intelect.

With last week's launch of its new Pocket PC 2002 software, Microsoft has sought to speed its efforts to close this gap. While there are many welcome changes to the operating system, there also plenty of reasons we're skeptical that they'll cause a seismic shift from Palm to Pocket PC.

There are two ways to get hold of the new version of Pocket PC: upgrade now or buy it on a device later. If you already own a Compaq iPaq with flash-upgradeable ROM, you can buy the upgrade from Compaq for $29.95. (If you buy an iPaq between now and the end of November, you'll get it free.) Or you can wait a while and get it on the next generation of Pocket PCs from Casio, Compaq, HP, and now Toshiba. For the past few weeks, we've been testing a beta version on the iPaq H3670, as well as on the new HP Jornada 565.

Much has been made of the Pocket PC 2002's new look and feel. While we agree that it looks slicker, the change is more akin to the jump from Windows 95 to Windows 98 than from Windows 3.1 to Windows 95. The icons look almost three-dimensional, and now parts of the interface are customizable. For example, you can swap in new Today screen skins (this feature was previously available only with a downloadable PowerToy).

Microsoft also says they've enhanced Pocket PC's usability. There are fewer dialog boxes and most applications now have a button in the upper right corner for switching tasks (but not closing programs out of memory). The company also claims they've done a lot to improve memory management, traditionally an area where Windows CE devices have lagged behind their Palm competitors. But so far we haven't been able to detect much difference.

Pocket PC 2002 does include a few new features and applications. Most of these were just user requests such as the ability to view contacts by company or sync multiple folders. But many of the new applications, such as a VPN client and Terminal Services, are also targeted at the enterprise market, where Microsoft is trying to expand its share.

So with all these improvements, why are we still skeptical?

First, with Pocket PC 2002, Microsoft has actually increased the already hefty (by PDA standards) hardware requirements. All Pocket PC 2002 devices must now have a 100MHz or faster StrongARM processor, and Microsoft recommends 32MB of RAM and 16MB of flash-upgradeable ROM. In other words, don't hold your breath waiting for the price of Pocket PCs to come down. How many companies do you know that have the money to deploy hundreds of $500 PDAs? With a plethora of Palm-based products selling for under $200, it's going to take a certain kind of user to plop down that kind of money for a Pocket PC.

Second, Pocket PCs are still more complicated than Palm-based PDAs, and therefore more costly to support. For instance, despite Microsoft's promise of easier USB synchronization, we still encountered sporadic problems getting our devices recognized by our PCs.

As we've long said, we made the jump to Pocket PCs because we take advantage of some of the added features, including the higher-resolution color displays, standard CompactFlash expansion, and built-in Windows Media Player. And if HP's Jornada 565 is indicative of the new generation of Pocket PCs, high-end PDA users should be very happy. The sleek 565 looks like a cross between earlier Jornada models and the Compaq iPaq, and has a gorgeous 16-bit (65,536 colors), side-lit screen (the iPaq can only display 4,096 colors). The screen is a hair smaller than on the iPaq, but the better color depth more than compensates. Our only knock is that the device only supports Type I CompactFlash, making the use of Type II-based products like the IBM Microdrive impossible.

Then again, Pocket PC users don't tend to be typical users. When Compaq released a lower-cost grayscale iPaq earlier this year, it was a non-starter. That says to us that most Pocket PC users are looking for all the bells and whistles. But the fact remains that many--if not most--PDA owners use their devices for little more than personal organizers. And there's no reason to spend close to $500 on one of those when a Palm can offer the same functions for a quarter of the price.

Is $500 too much to pay for a PDA? Or do Pocket PC's added features make it worth the price premium? TalkBack to us.