The repercussions of Sony's exit from the Clie market are already being felt all over the handheld industry. Many of us are mourning the lost of what was arguably the most innovative handheld company. The news also had a significant impact on PalmSource's stocks, which fell by 11.9 percent.

Sony said in its press release that "Sony is taking this time to examine the conventional PDA (personal digital assistant) business and how it will transition into the future,". To me, it simply reads: "We have been evaluating the handheld market and it is time to leave".

Even though Sony had always been producing handhelds that were ahead of its time compared to the others, many factors have made the overall handheld market unfavorable to them. Firstly, their multimedia rich products have appealed only to the consumer, and could never penetrate the enterprise market. Sony was never an enterprise product company. With the shrinking consumer market and ever increasing handheld enterprise market share, the situation doesn't boil well for them.

The announcement also comes at a time when Palm devices are rapidly losing market share to Microsoft's PPC. Earlier this year, Garter reported that the market share for Palm devices fell by about 20 percent, while PPCs have increased their share to about 40 percent, up from the measly 11 percent that they had a couple of years ago.

The next factor is probably the shrinking market share of handhelds in general. Handheld sales are being gobbled up by convergence devices that merge handheld and mobile phone functionality. Sony does not have such a device in its Clie line. The use of convergence devices is the direction that palmOne has been heading towards since its acquisition of Handspring but I'm not sure if this strategy will be enough to cushion the blow left by the departure of Sony.

Sony is PalmSource's second largest client and its exit from the handheld market is the first domino that could set of a chain of events that will eventually lead to Palm's downfall. When anyone thinks of Palm OS devices, they think of palmOne and Sony. Now that Sony is gone, there is only palmOne. Of course, there are other lesser known Palm OS licensees such as Samsung, Tapwave and Garmin, but no one will be able to fill the void left behind by Sony. palmOne may have launched a couple of really good handhelds recently, such as the Tungsten T3, but they will have to do much better if they want to survive.

We need that low end, low cost Treo, and that high end Treo with Bluetooth and Wi-Fi now.

Even though I hope that Palm OS will live forever, I have a feeling that this may not be the case 5 years down the road. It deeply saddens me.