Microsoft will make its strongest run at Palm when its new PocketPC technology starts appearing in handheld devices next month. The software giant has already released its PocketPC code to hardware manufacturers. It includes version 3.0 of the Windows CE operating system, a new user interface and a larger set of applications for the new generation of handheld devices, which follows Microsoft's Palm-sized PC platform for handhelds. "The software work is done," said Phil Holden, a group product manager in Microsoft's Mobile Devices Group. The most important element to consumers will be the rejigged interface, Holden said, followed by the added applications. Microsoft's PocketPC hardware partners, which are building their own PocketPC devices, are putting the final touches on the software in order to make it work for their specific products. Handheld devices from Casio, Compaq Computer and Hewlett-Packard will be in stores by Microsoft's official 19 April rollout date, Holden said. The user interface is a significant change as Microsoft aims to simplify the operation of the new devices over its Palm-sized PC technology. Microsoft is also aiming to be more than "just a PIM" (personal information manager). Taking a dig at Palm handhelds, PocketPC will deliver multimedia applications, including a media player and an e-book reader. The devices will also include pint-sized versions of Microsoft's Word and Excel applications to allow users to view and annotate documents on their devices. However, Microsoft still faces an uphill battle against the popularity of Palm handhelds, which hold an estimated 80 to 90 percent share of the market. "Very few people understand the differences between what we have and the Palm," Holden said. To that end, Microsoft will launch a major marketing effort to get its more-than-just-a-PIM idea into handheld users' heads. This will include advertising, as well as a road tour of 24 cities, where demonstrations of the new device will be given. On 8 April, the company will give a demonstration of the technology as part of Microsoft Extreme -- a showing-off of Windows Millennium Edition and PocketPC that will be held at movie theatres across the US. So what are Microsoft's chances against Palm? "I think they're good," said Jill House, an analyst with IDC. "In and of itself, (PocketPC) is a good iteration." IDC is predicting steady growth for Windows CE-based devices over the next three years. While it predicts that Palm will command 79 percent of the US market this year, as compared to Windows CE's 15 percent, the firm sees Windows CE growing to 40 percent of the market by 2003, leaving Palm with 58 percent. Consumers, House predicts, will evaluate PocketPC and Palm handhelds in the areas of price, look and feel, and features. With the devices' price being about the same, how the new PocketPCs look and their features will likely clinch sales, she said. "What I think will make a difference in retail and incremental sales is how the hardware looks," House said. PocketPC hardware will be competitive in price with Palm's IIIc, the colour handheld announced last month, Holden said. The Palm IIIc sells at a retail price of $449 (£278). Sources told ZDNet News that there will be two versions of PocketPC hardware. They include lower-cost PocketPC Standard devices and PocketPC Professional devices. Also, Palm-sized PC users will be able to upgrade their devices with the new PocketPC software, Microsoft said, although it will be up to the individual hardware manufacturer to deliver the required ROM upgrade. (The ROM is where the operating system is stored on the device.) "It's definitely possible," Holden said. However, "We're going to have to wait to hear from the OEMs" on whether or not they will offer and upgrade, he added. With PocketPC almost out the door, Microsoft's Mobile Devices Group will soon turn its attention to future projects. Foremost is the development of mobile phone based on Windows CE, Holden said. The company is also working on an upgrade for its Handheld PC Professional platform. Holden would not offer other specifics. Hewlett-Packard, sources said, will offer two PocketPC devices: Jornada 540 and 545. Casio is expected to deliver at least one device, called the Cassiopea E-115, sources said. The devices, which are slimmer to the point of being about the same as a Palm III handheld, are expected to have between 16MB and 32MB of memory and get about eight hours of battery life. While battery life seems to have suffered a bit, sources report that the HP units' screen offered much improved resolution. However, Microsoft announced on Wednesday an agreement with Texas Instruments (TI) to add support for TI digital signal processors (DSPs) to the Windows CE operating system. TI's DSPs are widely used in mobile phones because the chips can process data and voice communications at the same time. TI says the agreement will open Windows CE to advanced data and video capabilities, including digital audio, e-commerce and real-time video streaming on wireless handsets, using its newest DSP chip. Holden would not comment on the efforts to develop such devices at Microsoft. However, the agreement is likely a step towards developing mobile phones that use the Windows CE 3.0 OS. Additional reporting by Mary Jo Foley. What do you think? Tell the Mailroom and read what others have to say.