Palm Cancels Foleo Companion to Treo

Palm Inc. has canceled plans to release a laptop-like gadget that was supposed to serve as a smart-phone companion, months after the product was announced and ridiculed by analysts.

The Foleo, which had been slated to ship this summer, looked like a small notebook PC with a 10-inch screen, full-sized keyboard and Bluetooth and Wi-Fi capabilities. It ran on a version of the Linux operating system and did not have a hard drive.

Early on, analysts dissed the Foleo. In particular, they questioned why consumers would want to carry yet another device when they already have PCs that are getting smaller and cell phones _ including Palm's own Treo _ that are getting smarter.

"This is the most disappointing product I've seen in years," Todd Kort, an industry analyst at Gartner Inc., said this spring. "They have some longer term goals for this product in mind, but this is going to hit the market with a thud."

In a post on The Official Palm Blog late Tuesday, CEO Ed Colligan said the company decided to cancel the product and focus instead on its next-generation operating system and the initial smart phones that will work with it. He said the company will take a charge of less than $10 million for not releasing the product.

"Because we were nearly at the point for shipping Foleo, this was a very tough decision. Yet I am convinced this is the right thing to do," Colligan wrote.

He said the company's evaluation and early market feedback indicated there was still work to be done to make the Foleo a strong product, and Palm can't "afford to make those improvements on a platform that is not central to our core focus."

The Foleo may not be gone for good _ Colligan noted that he and Palm co-founder Jeff Hawkins think the Foleo's product category has "enormous potential" and wrote that when a Foleo II emerges it will work on the company's new platform. Colligan didn't give a timeline for a new Foleo.

Back in May, Hawkins referred to the Foleo as a product that "completes the picture" as far as mobile computing systems are concerned.

"There are times when people need a large screen and a full-size keyboard," Hawkins said at the time. "As smart phones get smaller, this need increases."

In a note to clients Wednesday, Morgan Keegan analyst Tavis C. McCourt, who has a "Market Perform" rating for the stock, said the company's decision is positive, because it lets Palm focus its limited resources on the smart-phone market, which is large and growing quickly.

"We believe a new operating system combined with better hardware form factors are the key to accelerating growth in Palm's smart-phone business, and we believe the transition of resources from the Foleo to the new operating system will prove a wise decision," he wrote.