Hoping to defend its market share in the personal digital assistants (PDA) operating systems (define) arena from encroachment by Microsoft, Palm Computing (Quote, Company Info, News) won a ringing endorsement from Sony (Quote, Company Info, News), which agreed to make a $20 million investment in PalmSource, the soon-to-be-separated Palm operating system (OS) unit, in return for a 6 percent stake, the two companies announced on Tuesday.

Embattled handheld maker Palm heralded the investment as a key win in its attempt to create a separate company for licensing the company's dominant operating system for handhelds. Palm would like to separate the two companies by the end of the year. PalmSouce is currently a wholly owned subsidiary of Palm.

"Sony's expanded commitment to the Palm economy illustrates the stimulating value that an independent PalmSource will have on the handheld industry," Palm chief executive Eric Benhamou said in a statement. "We remain driven to complete the external separation of our PalmSource subsidiary on an aggressive timetable."

Palm announced its decision to separate the OS business from its handheld-manufacturing unit in July 2001, hoping to capitalize on the ubiquity of the Palm OS in the handheld market. PalmSource trumpets its OS as running 24 million devices, 82 percent of the market, dwarfing its main rival, Microsoft Pocket PC.

Palm saw its market share slip in the second quarter, as customers awaited the release of its latest devices powered by Palm OS 5, which is due for release later this month.

Sony's Clie handheld line uses the Palm OS, along with PDAs from manufacturers such as Handspring and Samsung. The deal also calls for Sony and PalmSource to expand their business and technical collaboration.

By lining up firmly with Palm, Sony has again taken aim at Microsoft, which represents Sony's fiercest rival in the growing games space.