PALM PC MARKET A BATTLE FOR THEIR HEARTS AND PALMS MICROSOFT'S PALM PC IN HAND-TO-HAND COMBAT WITH PALMPILOT.

NEW YORK -- The Palm PC is Microsoft's latest attempt to unseat 3Com's popular electronic organizer, the PalmPilot.

Microsoft's first offering, launched at Comdex in 1996, was in the form of handheld computers running Windows CE 1.0. The operating system, a scaled-down version of Windows 95, is designed to provide seamless integration with a desktop PC.

Many believed that this feature -- among others -- would provide the handheld electronic organizers with a broad user base -- and deftly knock PalmPilot off the shelf.

"Microsoft tried to come up with a Pilot-killer," commented Walter Miao, senior vice president for research firm Access Media International, New York.

It didn't work. Corporate -- not mainstream -- America embraced these devices, which did not even make a dent in the PalmPilot, which owns about two-thirds of sales in the category, according to Dataquest, San Jose, Cal.

More than 1 million units have sold-through, according to 3Com.

The Palm PCs, however, which run on Windows CE 2.0, the next-generation version of the operating system, are smaller, lighter and less expensive than the handhelds; they also offer more-powerful processors, higher-resolution displays and greater functionality than the PalmPilot.

Some believe now may be Microsoft's time to elbow its way into the PalmPilot's turf.

What gives the Palm PC -- due to begin reaching market in April -- one advantage over the PalmPilot is the way Microsoft chose to bring it to market, according to analysts; namely, via consumer electronics partners.

"That is why they chose CES instead of Comdex to introduce it," said Miao.

"Microsoft went after popular consumer electronic brands -- like Samsung, Philips, LG and Casio. These brands have the means to bring the product into a more mass market."

The PalmPilot, on the other hand, is distributed primarily via computer specialty channels -- a strategy that is a "holdover from the U.S. Robotics days," said Miao. U.S. Robotics was the initial owner of the Pilot.

"3Com has to broaden its horizon and look at the consumer electronic channels."

Another advantge of the Palm PC is that it "is more user friendly," said Warren Raab, computer merchandise manager for Nebraska Furniture Mart, an Omaha-based superstore.

When would-be purchasers realize they need to learn a new language in order to use Pilot, they may be put off, Raab added, emphasizing, however, that using Pilot is "so simple it is unbelievable."

But, as the Palm PCs are higher-priced than the PalmPilot, will consumers be willing to pay for them?

Palm PCs are expected to have street prices of between $399 and $499, and the PalmPilot is $249, although 3Com could drive the price wedge even deeper by dropping the price point.

Analysts believe this is a possible strategic move. "I suspect the $249 will have to come down a little bit if they want the `unwashed masses,' " said Miao.

Raab, for one, wonders if consumers will be willing to pay more for a Palm PC. "This industry is so price driven," he said. "It's always, always, always price."

He added, however, that the category is "haphazard" and that a number of companies are releasing "Pilot knockoffs."

Mike McGuire, senior industry analyst, mobile computing, for Dataquest, San Jose, Cal., is not certain people will be willing to pay more for the extra functionality in the Palm PC.

Industry observers agree that the "palm" category overall is still made up of business professionals and not everyday consumers -- but that mass-market penetration is not far off.

The devices are now used by consumers "whose schedule changes so frequently that they require that kind of flexibility to maintain their data," McGuire explained. "The vast majority of consumers may not have extraordinary schedules, so they may not need a device like this."

When the Internet becomes useful in carrying out mundane tasks is when the mass market ultimately will be driven to the category, McGuire added.

"The social aspects of Web are nonsense," he said. "These pocketsize devices will become more important when they are down to about $100 and can notify you when your dry cleaning is ready or allow you to check bank statements."