Compaq's iPaq handheld is the one winner in a faltering PDA market, according to IT research group IDC.

In a report into the state of the handheld market released yesterday, IDC said that sales endured a 12.1 per cent year-over-year decline in units shipped during the first quarter of 2002.

Compaq's Windows-based iPaq gained some ground on runaway market leader Palm, and beat former second-placed Handspring, with over two million units sold.

But the company has some way to go to catch up with Palm, which shifted 15 million more units than its nearest rival.

This is despite devices based on the Palm operating system seeing particularly poor market performance at present.

Palm revenues fell in its third fiscal quarter by 38 per cent, and the Palm operating system-based Handspring unit saw revenues plummet in the same period by a huge 52 per cent.

Palm still leads the way, selling 1.26 million units in the first quarter of this year, equating to 39 per cent of the market.

Compaq sold 329,000 units, representing 10.1 per cent of the market. Other players include Hewlett Packard, Sony and RIM.

IDC said that Compaq was gaining fast on the leader with especially strong sales in Europe, but that the industry as a whole was still recovering from a tough 2001.

"Weak macroeconomics still persist in the handheld market," said Weili Su, senior analyst at IDC's Smart Handheld Devices research programme. "While we don't expect a rapid turnaround, the seeds of recovery are being sown."

Su added that economic improvements and new PDA offerings should kick start the market towards the end of this year.