Microsoft Corp. led the market in the third quarter for operating systems used in personal digital assistants, surpassing for the first time the Palm OS that dominated the handheld-computer segment for years.

The Redmond, Wash., company shipped 1.38 million units of Windows CE in the quarter ended Sept. 30, accounting for 48.1 percent of the market, researcher Gartner Inc. said Friday. PalmSource trailed far behind with 850,821 units, or 29.8 percent of the market.

During the same period a year ago, PalmSource shipped 1.2 million units, 46.9 percent of the market, compared with Microsoft's 1.04 million units, or 41.2 percent.
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PalmOne, the largest user of the Palm OS, led the PDA hardware market, but continued to lose market share to other vendors as it too shifted focus to smartphones. PalmOne's share slipped to 26.2 percent from 34.3 percent a year ago.

No. 2 Hewlett-Packard Co. increased market share to 24.2 percent from 23 percent, followed by RIM, which posted a huge jump to 19.8 percent from 4.9 percent. Rounding out the top five were Dell Inc., 6.5 percent from 5.4 percent; and Symbol Technologies Inc., 2.2 percent from 2.9 percent.