A recent report by IDC this weekk said sales of handheld devices worldwide dropped significantly in the second quarter of the year, as continued tight budgets and a lack of compelling new applications stifled demand.

Handheld shipments dropped 10.7 percent in the second quarter compared to the same period a year earlier, to 2.27 million units. That is a 10.2 percent drop over the prior quarter, indicating dried-up demand among businesses who have more pressing IT spending priorities, IDC said.

The report speculated that the failure to come up with a new killer application was a major factor in the loss.

According to the report Palm continued to lead the market with 39.9 percent market share. The Palm Zire 71 and Tungsten C devices spiked sales, IDC said. The rest of the market looks like this. Hewlett-Packard holds 16.8 percent of the market, Sony holds 11.3 percent of the market and Dell has 6.7 percent.