Palm has had a disastrous year, losing nearly half its market share and its position as the PDA top dog, according to Gartner. 

Manufacturer PalmOne is estimated to have just 17.8 per cent of the PDA hardware market, compared to 33.2 per cent this time last year.

As for operating systems PalmSource was leading the field in 2004 with over 40 per cent of the market, but Gartner estimates that this figure is now down to 20 per cent, leaving Microsoft dominating the sector at 45 per cent.

Palm has acknowledged that it is currently undergoing a "leadership transition" after David Nagel stepped down as head of the company earlier in the year. 

Gartner found that the PDA market grew in the past year, with annual sales up 32 per cent. Europe drove the growth, with sales up 94 per cent in the EU compared to 24 per cent in Asia and just 1.3 per cent in the US.

Gartner attributed the lacklustre US figures to the decline in Palm OS and the lack of new PDAs running Microsoft software.

"The steady growth in the PDA market can be attributed to a combination of factors," said Todd Kort, principal analyst in Gartner's Computing Platforms Worldwide group.

"Wireless PDAs are increasingly seen as an adjunct or alternative to notebook computers, while favourable exchange rates have enabled more Europeans to purchase PDAs at an attractive price. These factors have aided in the recovery of the slumping PDA market of 2002-2004."

In the hardware market the big winner was RIM, which manufactures the BlackBerry email client. Its share rose from 18 per cent to over 23 per cent of all PDA hardware sold, taking market share from both Palm and HP. 

Analyst firm IDC last month reported a drop in PDA sales. The two researchers use different definitions of the market. While neither firm considers the Palm Treo smartphone a PDA, Gartner included sales of the BlackBerry while IDC did not.