Palm Computing, the company which helped kick-start the handheld computer market, lost more than eight times as much in the three months to August 2002 as in the previous year.

The company made a net loss of $258.7m (£167m), widening from $32.4m in 2001, while sales slipped to $172.3m from $214.3m.

But when the costs of separating its operating system arm and a radical restructuring are taken into account, the company said, its losses - at $36.4m - were less than analysts had feared.

And it pointed to its latest initiative, the division of its product line into clearly-marked professional and consumer brands with a batch of new models, as evidence that better times were ahead.

How are the mighty fallen

The company almost single-handedly invented the market for handheld computers in the mid-1990s, along with Apple - which later gave up on its pioneering but overpriced and oversized Newton machine.

Now, though, all handheld makers are suffering a prolonged slump, with Palm feeling the pain worse than most.

Analysts widely believe that the company has wasted the past few years on unsatisfactory products and has let its operating system drift.

Meanwhile Microsoft's Pocket PC system - once a laughing stock - has hoovered up a large minority of the market.

Still, Palm has a number of loyal licensees including consumer electronics standbys such as Sony.

And the new products include for the first time a stripped-down consumer model intended to retail for less than $100, a new low in the handheld market.