Hardware suppliers shipped 12.1 million PDAs and other handhelds in 2002, down 9.1% from 2001, said Dataquest.
Corporations are still not buying as many PDAs as expected amid an IT spending low, said Dataquest principal analyst Todd Kort.
Business purchases of PDAs will climb when the industry figures out a better way to offer wireless data services, and resolves security issues to the content of IT managers, he added.
Shipments of Palm's PDAs dropped 12.2% in 2002, but Palm still shipped almost three million more units than its nearest competitor, Hewlett-Packard. Palm's 4.44 million units in 2002 represented 36.8% of the market, compared with HP's 1.63 million units and 13.5% of the market.
Palm's products have proved popular among consumers because of their lower prices and ease of use, said Stephen Baker, director of research at NPD Techworld.
While the Pocket PC operating system has appealed most to businesses, the emergence of cheaper iPaq devices and Dell Computer's new Axim PDA prove more popular in the consumer market.
Palm's low-cost consumer PDA, the Zire, has attracted first-time PDA users who are badly needed to reinvigorate the market, Baker said.
The third and fourth place manufacturers in Dataquest's study both use the PalmOS in their products.
Sony enjoyed strong growth of its Clie PDAs with shipments of 1.33 million units in 2002, up 163% from shipments the previous year.
However, shipments of Handspring's devices dropped sharply to 698,228 units in 2002, down from 1.37 million in 2002. The figures for Handspring do not include sales of its Treo PDA/phone devices, which are considered smartphones.
Toshiba posted the strongest gain among PDA vendors, shipping 450,298 of its Pocket PC-based units in 2002, up from an almost nonexistent 12,000 units in 2001.