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Move over, Palm. Compaq Computer is set to become the number one earner in the PDA market, according to a new report from research and consulting company Dataquest.

Compaq is expected to report revenue of more than $200 million from its iPaq handheld PC line in the second quarter, which ends June 30. Palm's hardware revenue is projected at $130 million to $135 million for its fiscal fourth quarter, which ended June 1, according to a Dataquest statement Monday.

But that doesn't mean that more people are actually buying the iPaq handhelds. Palm still leads in the number of units sold, but iPaq's much higher average selling price gives the company a revenue edge, the study concludes.

Taking third place in the market is Handspring, which recently projected revenue in the $60 million to $65 million range for its fiscal fourth quarter, ending June 30.

The iPaq, which runs Microsoft's Windows CE operating system for the Pocket PC, is gaining popularity with business users, primarily because of superior wireless messaging capabilities, Dataquest says. Palm has fallen behind in innovation in this area, where users are demanding such services as access to corporate e-mail, short message service (SMS), wireless local area network, or integration of a PDA with a mobile phone.

Palm has offered few improvements to its Palm OS software since the company split with its former parent company 3Com last year, allowing Microsoft's Windows CE 3.0 to catch up, the researchers say.

Microsoft's planned successor to Windows CE, code named Talisker, is due at the end of this year, giving the company a chance to solidify its lead with corporate users.

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