Palm announced it was pulling the plug on the Foleo project, taking a $10 million loss in the process. The news arrived via a posting by company CEO Ed Colligan to the company's official blog. You can find the full text on the next page.

The laptop-like 2.5-pound Foleo, with a 10-inch screen and a full-size keyboard, was to serve as the inaugural device in a new category of product for Palm called Mobile Companions. Foleo’s main purpose: To allow users to view and edit e-mail and documents from a smartphone (preferably a Treo) more conveniently, automatically synchronizing files back and forth between itself and the mobile handset through a wireless Bluetooth connection. You would have also been able to access the Internet for Web and e-mail, edit Microsoft Office documents and more on Foleo without a smartphone present.

In essence, Colligan's posting today simply says Foleo wasn't ready for primetime and that the device was draining resources away from other - more important - projects, such as the preparation of its next-generation, Linux-based, mobile platform and the development of the first smartphones to run on it. Rumor has it Palm will introduce its first Linux-run smartphone next month.

Foleo, he adds, was based on a different platform than the one Palm is developing for its smartphones—with a separate development environment as well. Supporting two platforms, Colligan asserts, would have been too much for the company and counterproductive.

Palm hasn’t given up on Foleo completely, however. Colligan emphasizes that there will be a Foleo II, as he and company co-founder Jeff Hawkins, who's baby Foleo was, still believe in the concept. It'll be based on the same platform that Palm is developing for its smartphones through. This would mean only one operating system for the company to support and create development tools for.

Most people won't be sad to see Foleo go. It has garnered a huge amount of negative press and a poor response from industry analysts. Many questioned whether users would be willing to shell out $599 for what is essentially a notebook computer, but without the full power of desktop operating system, and not for all that much less than the cost of a basic laptop. Also, weren't smartphones supposed to allow you to do everything Foleo promised, but in a much smaller package and without having to always lug a laptop around?

It didn't matter that Foleo promised to be the thinnest computer ever with a full-size keyboard or that it would have offered some other attractive features, such as instant-on, one-button connectivity and synchronization to a smartphone, or five-hours of battery life. Also, whatever analysts might of thought, the third-party software development community rallied around Foleo, promising a number of different applications would be ready by the time of launch.

No doubt canceling Foleo was a tough decision for Palm. It just may have been the right one.

With competition heating up from all sides (Nokia, RIM BlackBerry, Motorola, HTC and Apple with the iPhone to name but a few competitors) and its market share slipping considerably, Palm could ill afford to come out with a dud, a product that may have even of had trouble performing some of its most basic tasks (e.g. synchronization) as advertised.

Treos have been Palm's bread and butter for half a decade now. But Palm has only upgraded these devices incrementally over the last few years. As for the Palm OS, that's even more out of date.

If canning Foleo will help Palm focus its resources on developing a new and compelling series of smartphones running on a stable and up-to-date operating system, then that's the right direction for the company to go.

Even when Palm OS II and new smartphones running the platform are delivered, Colligan says Palm will continue to deliver smartphones based on Windows mobile. Palm's move to a two-platform strategy is one of its only success stories over the last couple of years.

See next page to read exactly what Colligan had to say.

Ed Colligan's Foleo Post

As many of you are aware, we are in the process of building our next generation software platform. We are very excited about how this is coming together. It has a modern, flexible UI, instant performance, and an incredibly simple and elegant development environment. We are working hard on this platform and on the first smartphones that will take advantage of it.

In the course of the past several months, it has become clear that the right path for Palm is to offer a single, consistent user experience around this new platform design and a single focus for our platform development efforts. To that end, and 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. We will, of course, continue to deliver products in partnership with Microsoft on the Windows Mobile platform, but from our internal platform development perspective, we will focus on only one.

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. Our own evaluation and early market feedback were telling us that we still have a number of improvements to make Foleo a world-class product, and we can not afford to make those improvements on a platform that is not central to our core focus. That would not be right for our customers or for our developer community.

Jeff Hawkins and I still believe that the market category defined by Foleo has enormous potential. When we do Foleo II it will be based on our new platform, and we think it will deliver on the promise of this new category. We're not going to speculate now on timing for a next Foleo, we just know we need to get our core platform and smartphones done first.

I would like to thank our customers for their interest in Foleo. I know there will be disappointed folks who were looking forward to carrying a Foleo for all their mobile computing needs. I am certainly one of them. I would also like to thank the developers who have supported our Foleo efforts. They have been loyal to Palm and have worked hard to deliver some compelling solutions on the Foleo platform. I know that they will understand that the right thing to do for the long run is to focus on one platform that will live for years, rather than invest energy in a one-off solution. We will make every effort to make sure we bring our developers forward to our next generation platform.

This decision will require us to take a limited charge of less than $10 million dollars to our earnings. This is a lot of money, but it is a small price relative to the costs that would be required to support two platforms going forward. This decision is in the best interest of our customers, our team, our products and our shareholders. I hope this renewed focus at Palm will allow us to deliver more compelling solutions to our core smartphone market, and it will allow us to position ourselves for the long run around one Palm experience.