And while the operating system is closing in on product-related launches, the Wall Street Journal reported Friday that Palm has been looking to partners like Sony (Quote, Company Info, News) to buy into another round of financing estimated between $50 and $60 million, casting a shadow of concern about future Palm OS updates. Palm said it would use the money to help it complete the separation of its PalmSource division.

In the meantime, some developers like DaggerWare founder Edward Keyes are left in the lurch.

"Well, my main application HackMaster has been explicitly ruled out from being implemented in Palm OS 5. That's a bit of an unusual data point, though... in the general case, it's a fairly typical OS migration: apps which do reasonable things require little or no reworking, while ones that have questionable rule-breaking behaviors need some fixing up. When I tested against prototype hardware at the last PalmSource, even some of my ancient apps from PalmOS 1.0 still ran fine. Mostly it's just that things which before were warnings only the developer saw are now turning into actual errors that users will see, so now we have to pay attention to them instead of just hoping for the best. It's kind of like the highway patrol suddenly starting to use radar traps... the speed-limit signs were always there, and law-abiding citizens always paid attention to them anyway, but now they really matter."

Palm still commands a 75 percent market share in handheld operating systems, but they are facing increasing competition from Microsoft . The world's largest software maker recently signed up Motorola's DragonBall processor family to its list of chips that support Windows CE, Microsoft's PDA operating system.

Palm, meantime said it is pursuing bigger fish on the application side, signing deals with IBM (Quote, Company Info, News), SAP AG (Quote, Company Info, News) and Siebel Systems (Quote, Company Info, News).