Windows CE is prepared to go down swinging this week when Microsoft Corporation releases its third (and some say final) major push to establish this tiny operating system as a viable alternative to the suddenly ubiquitous Palm OS. Windows CE (code-named "Pegasus") was launched with major fanfare at Fall Comdex 1996, but this Windows-like OS never really caught on with users. Despite a slew of product firsts (it was the first color handheld OS, for example), a very real technological advantage, and integration with Windows, the most popular desktop OS on the planet, Windows CE never really established itself as a true competitor to Palm. Sales of CE machines have tanked, and many hardware makers have dropped CE-based product lines in recent months. For fans of Windows CE, a new line of machines (now dubbed "PocketPCs") that will be unveiled this week is the final hope.

Microsoft has steadily improved Windows CE over the past few years, finally dropping the Windows-derived user interface for one that is more easily used with a stylus-pointing device. Windows CE 3.0 will include improved audio and video capabilities, eBook software featuring the company's ClearType technology, a new FileExplorer, and a Web browser that more closely emulates its desktop-based cousins. And because Microsoft now has an NT-based product for the embedded market, the company is focusing this latest revision of Windows CE on the consumer market, where Microsoft has seen far more success. Most Palm devices, of course, are sold as PC companions to office workers.

Early indications are that Microsoft has a winner on its hands: At a "Microsoft eXtreme" event last week, the company showed off the new OS publicly for the first time, and its powerful new features, which include a wireless Internet access option and MP3/WMA audio capabilities, were impressive. And analysts are bullish on Windows CE, quoting the oft-repeated maxim that Microsoft products are often most successful at their third iteration. But, a technical advantage may not be enough to fend off Palm, which dominates the handheld market. In this case, Microsoft finds itself on the opposite end of the market, a position it's unlikely to change regardless of the quality of its product. And I've heard that the CE team has been virtually abandoned within the company, because of fears that the dying product will forever taint employees' job histories. With a third and perhaps final push before it this week, a corporate brain drain is the last thing Windows CE needs.

Microsoft will officially unveil the new Windows CE and the PocketPC devices that will run the new OS this Wednesday in New York