By Tara Seals

As far as data devices go, Palm Inc. has been in the business as long as anybody, and has built a loyal following of anti-BlackBerry users for its PalmPilots and Treo smartphones. So it was with some fanfare that the company announced the Foleo mobile companion, meant to be its entrée into the new world of ultramobile computing.

Unfortunately, the buzz came back to haunt Palm when it canceled Foleo earlier this fall just weeks before launch, taking a $10 million earnings charge in the process.

The problem? Notably, the design is out of step with UMD trends. Rather than acting as a true UMD, the device could only surf the Web through an Opera browser over a Wi-Fi connection (or joined to the cellular-connected Treo via Bluetooth). It also had no hard drive, and lacked PC-like applications other than an Office to Go suite. While Palm said third-party developers could leverage APIs to write to the Foleos slimmed-down Linux OS, it was unclear whether the performance characteristics would be able to support them.

Instead, the Palm Foleo essentially was conceived as an extension for smartphones, to provide a bigger surface area to process e-mail and documents received by a Treo. To that end, the $499- after-rebate Foleo featured a full-size keyboard and large screen; users could view and edit e-mail and office documents synced from the Treo, and any changes were automatically reflected on the paired smartphone. Executives were giddy; Palm founder Jeff Hawkins called it the most exciting product Ive ever worked on.

Analyst Jack Gold of J.Gold Associates LLC says the product instead entirely missed the mark. Since this is a two-plus pound device, it is still something fairly large and heavy to carry, says Gold. Many users got a Treo (or a BlackBerry) in the first place to not have to carry around something that big. Will users be willing to carry around a peripheral that is four-to-five times the size and weight of their smartphone device?

Palm cites the failure as being an R&D problem, a result of having to develop two different platforms in tandem. After careful deliberation, I have decided to cancel the Foleo mobile companion product in its current configuration and focus all our energies on delivering our next generation platform and the first smartphones that will bring this platform to market, said Palms CEO Ed Colligan in a blog. Because we were nearly at the point of shipping Foleo, this was a very tough decision. Yet I am convinced this is the right thing to do. Foleo is based on a second platform and a separate development environment, and we need to focus our efforts on one platform.

This is a case of Palm needing to focus, says Gold. They are way behind on getting a new and updated OS and devices to market to compete with RIM, Nokia and others (including Microsoft). They do not have unlimited resources and need to apply their resources where it will do the most good upgrading and keeping their existing base of users happy, and not trying to build out a whole new market segment, which would have been difficult and costly.

Has Palm learned this lesson? Colligan mentioned Foleo II, which will be based on the forthcoming new platform. And the Palm TX handheld, first launched two years ago, has builtin Wi-Fi and Bluetooth, supports the full Microsoft Office suite and offers an unbridled Internet experience; it also supports MP3s, eBooks and video. But its major drawback is its lack of a full PC operating system; instead, it runs on the proprietary Palm Garnet OS, so the ability to add thirdparty applications is limited. No word as to whether Palm will upgrade the platform to become a true UMD, but at least it does give the device maker a foothold.