Palm said Wednesday that it will buy rival Handspring for approximately $169 million in an effort to strengthen its grip on the market for handheld devices.

Palm is the No. 1 seller of PDAs, but the company has been hit by slowing demand for handhelds and increased competition from new entrants, including Dell Computer. PDA shipments were down 21 percent during the first quarter, according to IDC. Shipments have been slumping for the past few quarters.

Both Palm and Handspring reported losses for their most recent quarters. Company executives expressed optimism that a united front would bring financial rewards.

Read more: CNet News.