A LITTLE over two years ago Bill Gates sat down and tried to figure where to go next. He'd pretty much sewn up the market for computer operating systems.

His office software was pretty much the world standard. Ditto, Internet Explorer.

Even back then, the X-Box was well into development and that should take the games console market by storm later this year. So what was left for the richest man in the world?

Well, there was one arena left to conquer. The hand-held PC market was proving a tough nut to crack. Microsoft had tried, of course, but it had failed. Its Windows CE system was well liked by a minority of users but most buyers found it too slow and the early machines ate batteries, a cardinal sin for a pocket-sized device.

A small, plucky British company called Psion had derailed the Microsoft colossus. Gates later identified the firm as his greatest threat.

Started by a genius inventor called David Potter (the name Psion isn't Greek as many people think, but an acronym of Potter Scientific Instruments Or Nothing) it originally programmed software for home computers like the Spectrum.

Psion invented the electronic organiser more than a decade ago. It came to dominate the market in Europe where the word Psion meant a hand-held PC device. Psion was to PCs what Dyson was to vacuum cleaners, the machine everyone wanted.

Last week Psion called it quits. The group had lost its grip on the hand-held market in quite spectacular fashion. And it's not just Psion that's hurting, either. Palm, the company that gave Microsoft a bloody nose on the other side of the Atlantic, is in trouble too.

Psion has been sailing through choppy waters for some time. Its share price would fluctuate wildly almost from week to week, as first some good news would make it look as though Gates' prediction was about to come true, then some bad would bring everyone back down to earth with a bump.

Sadly, for all its innovation, Psion failed to keep pace with the market. Its marketing efforts in America were also a flop (a Psion in the US is still an object of curiosity, not envy) and, worst of all, it failed to persuade a bigger company to invest in its next big hand-held, code-named Odin.

It thought a deal had been done with Motorola. The US giant would part fund the Odin machine and provide some components. In return, Psion would share some of the profits.

Unfortunately for both partners, the bottom fell out of the mobile phone market. Motorola, facing massive debts, had to save money - and fast. The Odin deal was canned earlier this year.

Initially, Psion put on a brave face. Yes, it was a setback, said the company. But we're confident Odin will be a quantum leap over existing organisers and if no other company can see that then we'll go it alone.

Things seemed to be going fine. Profits for the first six months of this year grew by five per cent to £99m. Behind the scenes, however, things were far from rosy.

Revenues from the hand-held division had shrunk dramatically, from £77m to £36m. Psion was being propped up by Teklogix, a Canadian company it had purchased the previous September, which had nothing to do with small PCs.

Odin would have utilised Bluetooth wireless communication technology to compute on the move but the roll out of Bluetooth technology has been maddeningly slow. Even now, only a handful of devices are capable of using it.

To make matters worse, the hand-held market appeared to be reaching saturation point. Palm, the market leader, has been left with millions of slow-selling machines (inventory stands at around ten-weeks worth of stock) and has been forced to slash prices to stay afloat.

Ironically, the only devices in demand are the fourth generation Windows CE machines, now re-christened Pocket PCs, because they are fitted with powerful processors that make them every bit as productivity as a desk top PC.

Faced with the prospect of launching an untried machine into a waning market, Psion bailed out. David Lewin, the company's chief executive, said: "At some time we were going to have to call time on new developments. We're calling time now."

It's a sad day, particularly because Psion's products always displayed a clarity of thinking and purity of design so lacking in other offerings. The Series 3 and the Series 5, in particular, will go down as classics in the field of small computers.

Perhaps one day Psion will feel able to enter the fray once again. Until that moment, I won't be getting a new organiser, I'll be sticking with my trusty Series 5, thanks.

REVIEWS

Omnimusha: Warlords. Publisher: Capcom. Format: PS2. Price: £39.99

AT least the market is looking perky for PS2 owners at the moment. One of the most eagerly awaited titles to hit Sony's black box is Onimusha: Warlords, a kind of samurai warriors meets Resident Evil.

Whereas Resi favours the stealthy approach, building up an atmosphere of unease before hitting you with a zombie, Omnimusha is much more in your face. At least your character has a massive magic sword with which to fend off the evil hordes.

Each demon you slay offers up its soul, which builds your arsenal and restores your health. If things are looking a bit grim there are always the health boosting herbs, a la Resident Evils 1,2 and 3.

Unsurprisingly, this game is from Capcom, the guys who brought you Racoon City, the T-Virus and Nemesis. (If this means nothing to you may, I suggest, dust off the PlayStation and invest £30 in some of the best survival horror ever committed to disc).

The visuals look better than ever, the puzzles aren't too difficult to get in the way of the action, and the story keeps you coming back for more.

Like its illustrious cousins, Onimusha isn't a particularly long game, but it is darn good fun while it lasts. Highly recommended.

CHEAT OF THE WEEK

Another fine survival horror game on the PS1 is Nightmare Creatures but the all-action element makes it hard to finish. If you're having a hard time just input the following cheat to give yourself unlimited lives: press left, up, triangle, down, circle, triangle, square, and down to reveal a whole new menu.