Sharp will use Lineo's version of Linux in an upcoming handheld computer, a significant victory for Lineo as it works to push Linux into non-PC devices such as network equipment and set-top boxes. Sharp originally announced at the CeBit trade show in Germany that it planned to use the Linux operating system to power a new version of its Zaurus personal digital assistant. Now Sharp has picked Lineo to bring the plan to fruition. A Lineo representative said Sharp will use Lineo's Embedix version of Linux and rely on Lineo's programming expertise to help tailor it for the Zaurus. Lineo and Sharp plan to announce details of the deal later today. A handful of Linux handhelds are emerging, and Linux can be installed on several handheld computers -- most notably Compaq's iPaq. But thus far, Linux hasn't caught on for mainstream use the way the Palm operating system and Microsoft's Pocket PC have. The handheld market doesn't look as glamorous as it did even a few months ago. Handheld computers such as those from Palm and Handspring once occupied a hot market where demand often outstripped inventory. Now, though, the economic slowdown has hammered Palm; once-scarce PDA models are overabundant, and handhelds are approaching the same commodity status that has shriveled profit margins for PCs and cell phones. Lineo, a sister company to Linux server company Caldera International, initially held the prime position in the movement to push Linux into a host of non-PC "embedded" computing devices. But the sour investment market for Linux forced the company to withdraw its initial public offering plans. A host of competitors, including Microsoft, Red Hat, LynuxWorks and MontaVista Software, also are vying to wrestle leadership in the embedded operating system market away from the top company, Wind River Systems. Find out how the open-source movement is revolutionising the high-tech world at ZDNet UK's Linux Lounge. Have your say instantly, and see what others have said. Click on the TalkBack button and go to the Linux lounge forum Let the editors know what you think in the Mailroom. And read other letters.