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Faced with increasingly fierce competition in the Japanese market, Palm Computing will begin selling its M100 personal digital assistant for $40 this Saturday.

The price represents a drop of almost two-thirds from the current retail price and is part of a special promotion, currently scheduled to run for three months, that is intended to boost Palm's market share both for hardware and for its PalmOS platform in Japan.

The company is launching the promotion in the face of a growing lineup of devices based on Microsoft's Pocket PC operating system from major Japanese electronics manufacturers.

This year Toshiba and NEC began selling Pocket PC-based PDAs. Fujitsu is in the process of developing its own device. Their entry into an already-crowded market has sparked a battle for supremacy between Pocket PC; Palm's own operating system, which is also supported by Handspring and Sony; and Sharp, which bases its Zaurus line of machines on a proprietary system.

A spokesperson for Palm in Tokyo, Hitomi Yamabe, wouldn't comment on whether the company is making any money at the promotion price, although she says, "The idea is to get customer attention and make a larger user base."

Palm had a 13 percent share of the domestic PDA market in 2000, according to data from Yano Research Institute, behind Sharp, NEC, and Handspring. The Palm operating system accounted for 36.5 percent of the market, says Yano, behind Microsoft's Windows CE, the predecessor to Pocket PC, which had a 44.9 percent share.

In addition to slashing the price of the M100, Palm is also lowering the price of the M500 to $200 and the M505 to $280. The promotional prices are significantly lower than those the company charges for equivalent products in the U.S., where they cost $329 and $399 respectively.

Palm is not the first PDA company to react to the heavy competition with low prices. Handspring sells its Visor Edge and Prism PDAs for $160, compared to $299 in the U.S., while the Visor Deluxe costs $80 locally, compared to $129 in the U.S.

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