Is there a little less hand-holding in store for the handheld sector? While industry pioneer and fledgling penny stock Palm(Nasdaq: PALM) posted another dud of a quarter, the company is upbeat about the future. Shaking off a wider loss that came in ahead of Wall Street's estimates on a pro forma basis, Palm sees double-digit growth for the industry in 2003.

Fighting two years of unfulfilled hype, botched rollouts, and inventory overloads, Palm and rival Handspring(Nasdaq: HAND) are now duking it out in the equity buck bin. While Palm still commands 59% of the market share, keeping that lead has involved far more discounting than the investing public would like to see.

Even Research in Motion(Nasdaq: RIMM), which at first resisted the weakness of its petite peers due to the strength of its BlackBerry wireless email product, has caved in. Its shares have surrendered more than two-thirds of their value, hitting $30 in March.

On the Palm front, new products and an enhanced operating system are on the way. And while sales fell short in the company's first fiscal quarter, Palm was able to grow its top line back in August. Sure, most of that came courtesy of dramatic markdowns, as the company continued to shovel out its dated inventory, but at least the units are moving and penetrating the marketplace.

The risks here are as huge as the handhelds are small. Until the sector gets back into the black, it's a gamble. Still, keep an eye on how holiday sales shape up. A lot is riding on Palm's newest wares, and the company is expecting to break even this quarter. It's do or die time for the fallen darling.