Microsoft's Windows CE has knocked Palm off the PDA operating system sales top spot for the first time, newly released market research has revealed.

According to the latest report from Gartner, PDA shipments exceeded 2.8 million units in the third quarter of 2004, as Windows CE licences surpassed the Palm OS for the first time.

Windows CE was found to account for 48.1 per cent of worldwide PDA shipments in third quarter of 2004. Palm OS units represented just 29.8 per cent of the market, down from 46.9 per cent in the same period last year.

"The robust Windows CE market has been driven in part by the wide choice of vendors," said Todd Kort, principal analyst at Gartner's Computing Platforms Worldwide group.

"Business customers tend to steer clear of markets dominated by a single supplier, which is where the Palm OS market stands today."

A decline in Palm OS shipments was expected in the third quarter of 2004, but not of this magnitude, Kort added. "The company is pouring the vast majority of its resources into its smartphone business. A reduction in the number of PDA models palmOne offers is expected in 2005," he explained.

The analyst firm found that PalmOne continued to lead the worldwide market in PDA hardware shipments, but declined 13.3 per cent in the third quarter of 2004.

PalmOne's market share totalled 26.2 per cent, but HP and Research In Motion showed substantial increases in shipments in the third quarter of 2003.

Overall, Gartner expects worldwide PDA shipments to total 11.9 million units in 2004, up approximately four per cent from 2003.