(FORTUNE Magazine) – Newlyweds HP and Compaq have delivered their first offspring, a set of fraternal twins. Both weigh 6.5 ounces and are slightly more than five inches long, and oh, baby, are they expensive.

Reflecting the hasty wedding, the two new handheld computers from Hewlett-Packard were given the mother's maiden name: Compaq iPAQ. HP says future iPAQs will be christened with the HP name.

There's no doubt about the lineage of the iPAQ H3970 and H3950. The iPAQ line was a significant part of the dowry HP received when it took Compaq to the altar. Of all the PDA handhelds based on the Microsoft Windows Pocket PC 2002 operating system, iPAQs have been by far the most popular--so much so that once HP adopted them, it put its own Jornada PDAs in the orphanage.

The iPAQs were already among the most expensive handhelds, and now they cost even more. The model that I tested, the Bluetooth-enabled H3970, lists at $749; the non-Bluetooth H3950, $649.

Waaah! Are they worth it?

First, relax. The new iPAQs use the same sleeve-type expansion packs as Compaq's older models, so upgraders can save money with hand-me-down add-ons.

When they're asleep, the new models appear identical to previous Compaq iPAQs. Once they wake up, however, they reveal the biggest, brightest, baby-blue startup screens of any PDAs around. Engineers at "the New HP," as the company bills itself, added a transflective TFT liquid-crystal color display that's quite simply the best of any current PDA. Colors appear richer, contrast is sharper, and the screen is readable even in bright sunlight.

Then there's the new microprocessor, a 400-megahertz Intel XScale PXA250, which replaces the 206-megahertz Intel Strong ARM chip in recent iPAQs. Both HP and Intel say the oomph of the XScale nearly doubles the performance of the new iPAQs while consuming less power (which leads to longer battery life). Frankly, I didn't feel the whoosh of doubled processing power--maybe the occasional flutter of faster performance--but the life of the lithium polymer battery does seem improved.

If there's something else to fall in love with in the new iPAQs, it's the clever new application called Nevo. Designed by Universal Electronics, the company that makes the brains in some 25 million remote controls around the world, Nevo transforms iPAQ's screen into a simple yet powerful universal remote control for the home. To that end, the iPAQs also have a new consumer infrared remote (CIR) transmitter to go along with the standard Infrared Data Association (IrDA) port. IrDA is good for squirting data between computing devices over short distances, while CIR is better for blasting the TV, DVD player, or stereo from across the room.

I've tested fancy universal remote devices that cost even more than the iPAQ but weren't nearly as easy to operate. Would anyone pay $649 or $749 just to use the iPAQ as a remote control? Nah. But the combination of Nevo's software and the iPAQ's touchscreen is compelling, especially for those of us with seven remotes scattered across the coffee table. Space doesn't allow extolling all of Nevo's virtues here, so check out www.mynevo.com for a demo.

Besides IrDA and CIR, the iPAQ H3970 has a Bluetooth transceiver. Bluetooth, a wireless networking technology, is itself in its infancy and has had teething pains. More Bluetooth-enabled devices are showing up, however--mobile phones, printers, PC cards--and the iPAQ H3970 is ready to communicate with them. (The iPAQ H3950 doesn't have Bluetooth, and thus doesn't have the dark, protruding brow of its big brother.)

What else is new? There's an image viewer that organizes digital pictures and makes slide shows, and a handy backup utility that can be programmed to work automatically. There's a SecureDigital (SD) slot for internal expansion using postage-stamp-sized plug-in cards, and the new iPAQs support something called SDIO (for input/output), which you can ignore until someone actually comes out with an SD-based modem, or a WiFi or Bluetooth network adapter. Meanwhile, the SD slot is good for storing MP3 files or e-books, which are actually almost pleasant to read on the iPAQ's screen. HP sells a new 256-megabyte SD card for about $200.

It will be interesting to see how the new iPAQs fare when other XScale-based Pocket PC handhelds begin to emerge. Toshiba's e740, for example, costs $599 and has built-in support for WiFi networking, as well as dual SD and CF card slots. HP is rumored to be pregnant with a WiFi-enabled iPAQ of its own, due later this year.

Overall, I'm impressed with the iPAQ H3900 series, but I can recommend it only for people for whom money is no object. For the rest of us, it's close, but no cigar. Perhaps "the New HP" actually stands for "the New Higher Prices."

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