The trend marks a strong departure from last year's event, where devices using software from Palm stole the show.
"From last year to this year, there has been almost a complete flip-flop," said Chris Shipley, executive producer of the Demo conference.
"Palm has a lot of things they need to do," said Ronald Spears, president and chief executive officer of Vaultus, whose company used an iPaq to demonstrate its wireless enterprise software management product.
In particular, Palm has been slack with support for the popular Java language, said Spears. Although Microsoft has pulled back on its support for Java as well, the hardware makers using Microsoft's OS have several options to install Java support in their products.
In addition, Compaq simply made a better-looking product that was marketed well, Spears said. A rich, colour operating system on a shiny aluminium device with a bright display shows off Vaultus' applications better than any other handheld, he added.
Palm still maintains a larger presence in the consumer space than does its rival, but the attractiveness of the iPaq had enterprise-focused and consumer-focused companies alike using the Compaq platform to demonstrate their products.
Although Palm's presence at the show and its recent financial condition appear grim, the same people who were touting Microsoft said the battle between the two vendors is not over yet and opportunities remain for both.
"It is a war that will be waged for a long time to come," Demo's Shipley said. "It is way too premature to beat the death knell for Palm."
Palm's recent acquisition of operating system maker Be, and its decision to spin off its operating system division could provide the spark the company needs, Shipley said.
Be has had success making an operating system and other software for Internet appliances. According to Shipley, Be's work with multimedia applications on the appliances could jazz up Palm's staid image and add a new layer of personality to the Palm OS.
Improvements in bandwidth on wireless devices and new handheld-based software services could also create a new type of market open to any of the major players able to predict industry trends, said Steven Stenton, former head of Symbian's smartphone division.
"Whoever gets the services picture right, whether they sell a clunky device or whatever, will fly," he said. "If Palm can advance its operating system and integrate communications technologies into the [operating system], they have a fighting chance."
Wireless technologies such as global positioning system and always-on wireless devices should create new opportunities for all the handheld software and hardware makers, Stenton said.
By delivering interesting location-based services or solid applications that take advantage of constant Internet connectivity, such as automatic synchronisation, a company such as Palm could regain its promise in the mobile space, he added.