By Paul Larson (TMF Parlay)

I recently bought my first personal digital assistant (PDA), and I'm addicted. I carry it around with me everywhere, and it has helped me to keep my hectic life in order. Phone numbers, addresses, meeting times, birthdays -- the list of what I now depend on my PDA for goes on and on. I know I'm not alone in loving my PDA. PDAs are one of those technological inventions that once you start using it, it is hard to imagine life without it.

To be succinct, the PDA industry as a whole has many years of vibrant growth ahead of it, and Palm is positioned to greatly benefit. There are many reasons to like the industry leader, and below are just a few of the larger reasons.

Growth, growth, growth
Estimates for the PDA industry's growth are all over the board, but the one thing they have in common is that they are all very bullish numbers. Annual growth in excess of 50% over the next three years would not be surprising, and the industry should see vibrant double-digit growth beyond that for the foreseeable future.

For Palm itself, the company showed 28.6% sequential -- not annual, sequential -- growth in the most recent quarter when it grew sales from $272.3 million to $350.2 million. This is on top of growing sales some 87.6% in the fiscal year ended in May.

Palm dominates the industry
Palm Computing commands a dominating share of the PDA market. Just under 80% of all PDAs sold today are made by Palm, a simply staggering market share. Actually, sometimes it is hard to tell where the overall industry ends and Palm begins! I also have reason to believe that Palm will continue to own an enormous share of the market, and that reason is the Palm Operating System.

Sustainable advantage -- Palm OS
The primary driver behind Palm's impressive market share and the key to the company's future is the Palm Operating System. It is the de facto standard in the industry, and it has created a huge sustainable competitive advantage for Palm. As the largest operating system in use, it has attracted the greatest number of software developers. There are now literally several thousand applications for the Palm platform, and this attracts consumers to choose the Palm OS over other operating systems such as Microsoft's (Nasdaq: MSFT) Windows CE. It's the network effect at its finest -- a great number of buyers attracts sellers, and vice versa.

Benefit from others' growth
In a smart move, Palm has started to license its Palm OS to other handheld computer makers. So, whenever Handspring (Nasdaq: HAND), Nokia (NYSE: NOK), or Sony (NYSE: SNE) sell a PDA with the Palm OS, Palm gets a small cut of the profit. The best part is this revenue stream costs Palm essentially nothing and is basically pure profit. Palm has said in the future it will focus more on being a software and applications provider, a less capital-intensive business that has extremely high profit margins.

My recent PDA purchase was, in fact, a Handspring Visor. One hundred percent of Handspring's products run the Palm OS, which means a chunk of my purchase price flowed back to Palm.

Extremely strong brand
Even though I am the proud owner of a Handspring Visor, whenever I lose it around the house, I ask my wife, "Honey, have you seen my PalmPilot?" I think this speaks volumes about Palm's brand. Being the first on the market with a truly useful handheld computer has given it a great deal of name recognition.

Lots of ammunition
Thanks to its healthy operating results as well as an enormously successful IPO, Palm has a pristine balance sheet. It has over a billion dollars in cash and has no long-term debt. This gives the company more than enough capital to continue growing its business.

In summary -- lots to like
Between the industry's breakneck growth, Palm's dominating share of the industry, and the company's strong and sustainable competitive advantages thanks to its operating system, there are plenty of reasons to be attracted to Palm. Though I'm sure my fellow Fool Joe disagrees with me....

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