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The announcement is set to be made in San Francisco where Palm, Microsoft and US telco Verizon are planning to hold a joint press conference. At the conference, Palm will announce that it will be dropping the PalmSource operating system in favour of Windows Mobile 5.0.

Although there has been speculation that Palm would eventually jump to another operating system for its phones and PDAs ever since it spun off the PalmSource operation several years ago, it will still come as something of a shock to many diehard fans. However, the increasing integration between Windows Mobile and corporate back end services managed by Exchange Server means that Palm has seen its market share dropping in favour of Microsoft and RIM's Blackberry offerings.

While the Treo - a PDA that is also a phone - has been well received, it has struggled to find a niche in the corporate market faced with IT managers looking for seamless connectivity with the office networks.

PalmSource itself was bought by Japan's Access earlier this month for $324 million. The company has been in trouble ever since its biggest customer Sony pulled out of the PDA market.