The IDC study, released on Tuesday, showed sales slightly better than in the first quarter but down 2 percent from a year earlier.
"Despite continuing developments in device technology and simultaneous declines in price points, handheld devices still face stiff competition from an increasing range of converged mobile devices capable of performing basic handheld tasks," IDC mobile device analyst David Linsalata said in the report.
The key, Linsalata said, is for handheld makers to continue trying to add in other technologies, such as Global Positioning System, or GPS, navigation capability.
The market leader, PalmOne, saw its shipments increase 14.1 percent from the first quarter, but the company posted a year-over-year gain of less than 1 percent, accounting for 42 percent of all units shipped.
Hewlett-Packard saw its shipments drop more than 8 percent sequentially, costing it three percentage points of market share, but the company held the No. 2 position with 24.1 percent share. However, HP's shipments were still up 39 percent from a year ago, and the company has a number of new products due out this quarter that IDC said should leave it in a better position.
IDC analyst Alex Slawsby said HP is going after both businesses and consumers, as well as introducing devices that add telephony and entertainment features.
"They're really trying to squeeze each bit of demand in this market that's out there," Slawsby said.
Sony retained the No. 3 spot with 7.8 percent market share, but it is unlikely to hold that position much longer, as it has announced plans to exit all but the Japanese market. The company has already been losing ground, with second-quarter shipments down 14.6 percent sequentially and 33.2 percent year over year.
Dell also lost ground from the first quarter -- but only slightly, with 6.6 percent share. Its sales grew 4.6 percent from a year ago but dropped 7.8 percent from the first quarter. "However, Dell's newest flagship handheld, the X30, is expected to continue to build momentum in the next quarter and help the company improve its market standing," IDC said in its report. German PC maker Medion held on to the No. 5 spot, with about 4 percent of the market.
Sony's decision to back out of certain markets will put pressure on PalmOne to keep PalmSource's operating system from losing ground to the rival Windows Mobile operating system. Sony devices have used the Palm OS.
"While it remains unclear as to what degree Sony's departure aided PalmOne's increase in shipments during the quarter, the burden is clearly on PalmOne to pick up Sony's loyal user base during the second half of the year -- or lose them to the competition," IDC said.
