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Palm cut the price of its top model for the first time on Thursday, dropping the price of its M505 by $50, and at the same time launched a promotional offer including accessories on several other models.

Along with cutting the price of its high-end color Palm M505 personal digital assistant to $399, the hand-held maker launched a promotion in which buyers can get a 16MB Secure Digital expansion card and coupons for other accessories with the purchase of an m125, m500 or M505, the company said in a statement.

The mail-in promotion is good for devices purchased between today and January 7, 2002, and includes coupons from companies including Intel and Hewlett-Packard. The offer is valid in the United States, Puerto Rico, the U.S. Virgin Islands and Canada, Palm said.

The price cut on the M505 is the latest in a long series of cuts by Palm and competing Palm OS device maker Handspring in a battle to sell hand-held devices in an ailing economy.

Palm is also facing tough competition, especially on its high-end devices, from PDAs running Microsoft's Pocket PC operating system. Compaq, Hewlett-Packard, Casio, and Toshiba all offer devices running Pocket PC, while Sony offers its own PDA, the CLIE, running Palm's operating system.

A study released today covering the hand-held market in Europe said that while Palm's sales dropped 56 percent in the third quarter, competing vendors actually saw an increase in sales. Nokia sold nearly twice as many of its 9210 Communicator devices as it did a year earlier, while Compaq saw its unit sales increase 81 percent from the year-earlier quarter.

Nokia is now the market leader with 28.3 percent of the market, while Palm's own share dropped to 20.2 percent, according to the study.

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