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Palm shock as Palm Foleo is killed off

Smartphone companion cancelled at last minute

Just when Palm was expected to ship the Foleo, its controversial smartphone companion product, the company instead decided to kill it the whole project.

In a blog posting, Palm CEO Ed Colligan wrote that he decided to cancel the Foleo so the company could focus all its energy on a single product platform. While Palm will continue to offer some products that use Microsoft's Windows Mobile software, going forward all its internal work will be on a new software platform due out next year.

Just over a week ago, Palm denied reports that the launch of the Foleo would be delayed. Palm first introduced the product in May, saying it would ship in the summer.

The Foleo was a Linux-based lightweight PC that would operate in conjunction with the Treo smartphone. But because the Foleo had little processing power, it wouldn't add much more than a larger keyboard and screen, so it could hardly justify the proposed $500 (£250) price tag, said Todd Kort, an industry analyst.

Palm still believes a product like the Foleo could work and plans to build a 'Foleo II' based on Palm's upcoming software, Colligan wrote. He wouldn't speculate on when that second-generation product ship.

"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 cannot afford to make those improvements on a platform that is not central to our core focus," he wrote.

Criticism and lack of market interest may have contributed to Palm's decision to kill the product, Kort said. "There was very little interest in it from the public," he said.

Palm also may have stumbled in generating interest from the developer community, he said. Developers don't want to work on products for a platform unless it's likely to be successful, and the negative response to the Foleo may have kept many developers away, he said.

"I think Palm was wise enough to pull back when all the signs were indicating negative," he said.

Palm isn't in the position to take a big risk on a new product category. While the company is still profitable, its sales have slowed considerably as it moves from being a PDA maker to a smartphone developer. Palm's profit for the quarter ending June 1 reflected a 44 percent drop from the same quarter last year.

"If they would have poured a lot of resources into this and failed, it could have dragged the company down pretty quickly," Kort said.

Palm will take an earnings charge of less than $10 million related to the cancellation, Colligan said in the blog post.

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