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Handheld maker Palm Inc. and Microsoft Corp. have been hacking at each other's market for years, but they have finally buried the hatchet. The result is a new high-end smart-phone called the Palm Treo 700wx that runs on an operating system created by Microsoft and a connection on Bell Canada's high-speed data network.

The new smart-phone, a combination of personal digital assistant and cellphone, was unveiled in Canada this morning.

In announcing the new device, Palm vice-president Michael Moskowitz indicated that the 700wx is the first of what will be the centre of Palm's strategy for the future. "By 2011," he said, "all mobile phones will be smart phones."

The Palm PDAs, originally intended to compete with laptop PCs, have seen increasing competition from smart phones, especially the BlackBerry, from Research in Motion Ltd., of Waterloo, Ont.

Despite being a pioneer of wireless (or "push") e-mail, RIM has itself faced stiffer competition with rival e-mail services that are increasingly being included in smart phones.

The excitement surrounding the just-released BlackBerry Pearl, a smart phone that RIM loaded with a variety of software applications, is further indication that the traditional market for handheld computers has shifted, even threatening to supplant the laptop PC.

RIM, which made its impact on the market primarily through business users, has designed the Pearl to appeal to a broader, non-corporate audience. In contrast, Palm's 700wx is being directed specifically to business users, particularly those who do not receive corporate e-mail, who Mr. Moskowitz says comprise 90 per cent of the mobile market.

The peace pact between Microsoft and Palm comes after several years during which Palm lost significant market share as a number of successful smart-phone competitors embraced Microsoft's Windows Mobile operating system. The new Palm, Mr. Moskowitz said, is a "phone-first" device, an acknowledgment of a common criticism of Palm's earlier smart-phones, which placed more emphasis on the non-phone features.

Palm, which once dominated the handheld market, insists that it would continue to support the Palm operating system. In fact, the company announced two new phones to be released before Christmas, the Treo 700P and the Treo 680, both of which run the Palm operating system. Both, however, have been rumoured to be Palm's last devices to run the Palm operating system.

Palm is hailing the Treo 700wx as a revolution for the cellphone industry, bringing together Palm's expertise in handheld computing and Microsoft's familiar Windows Mobile 5 operating system. The company's decision to go with Windows Mobile was made largely to satisfy corporate customers, who have shown a preference for using smart-phones that receive e-mail based on the same software as Microsoft Exchange and the Outlook e-mail system.

The Treo 700WX is the first smart-phone made by Palm without the operating system the company introduced in 1996. And with the Bell high-speed mobile network as the carrier, Palm and Microsoft claim it will become faster and easier for the device to read e-mail attachments, stream Internet radio and surf the Web.

The 700wx is a dual-band CDMA, 1xEv-DO cellphone handset (800MHz for voice and 1900MHz for data). It runs on an Intel 312MHz XScale processor and comes with 128MB of memory, with 60MB reserved for user memory. It measures 13 cm by 5.8 cm by 2.3 cm, and weighs in at 181 grams.

Features include a touchscreen for easier Web surfing, copy-and-paste editing, the ability to view Word, Excel, PDF and PowerPoint files, and the ability to save images and sounds from the Web. It also has a 1.3-megapixel camera with zoom and video features, Bluetooth 1.2 connectivity, a multimedia expansion-card slot that accepts SD, SDIO and MultiMediaCards, and a 240-by-240 transflective screen.

It can even be used as a wireless modem.

The removable lithium-ion battery is said to be good for as much as 4.7 hours per charge, and that it takes only three hours to fully charge the battery from empty.

Palm has also added a few of its own features to the operating system. The software will search for a telephone number as the user starts typing a name, and can dial when a user clicks on a photo of a contact. Two programmable soft buttons on the front screen come configured for voicemail and a 411 directory, but can be reassigned as the user wishes.

The Treo 680 is powered by an Intel PXA270 312MHz processor and features a large colour touchscreen, full Qwerty keypad and a modest 1.3-megapixel VGA camera. It has quad-band connectivity compatible with any GSM network, and Bluetooth and infrared connectivity for transferring data to another device.

In addition to its on-board 64MB memory, there is an expandable memory slot for extra storage space. Other features include a speakerphone mode, polyphonic ring tones and a 2.5-mm headset port.

PalmSource, the operating-system division, was originally part of Palm but it was spun off in 2003. It had not experienced much success in expanding its customer base and getting its products, particularly a simpler operating system for cellphones, to market. Earlier this year, Palmsource sold its share of the Palm trademarks back to the hardware arm and put itself up for sale.

Palm Inc. tried to buy back the Palm OS, but major U.S. and European handset makers jumped into the bidding and the price became too high.

Last month, a Japanese company named Access Co. bought PalmSource and renamed the operating system Access, which is revamping the operating system, basing it on Linux, with a Palm emulation environment built in, and calls it the Access Linux Platform. Palm said it plans to use the ALP platform in other devices.