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First there was the rumored delay, then possible performance problems cropped up. And yet, for weeks, Palm denied its Foleo device was in any sort of trouble. Well, today, the company did an about face.

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.