May 31, 2007 / 2:43 AM / 12 years ago

Palm unveils compact portable computer

NEW YORK (Reuters) - Palm Inc. PALM.O on Wednesday introduced a compact portable computer to accompany its Treo smartphone, seeking to regain its competitive edge in the crowded high-end handheld device market.

A Palm Foleo (L) and Treo smartphone in an undated file photo. Palm on Wednesday introduced a compact portable computer aimed at helping business travelers better manage their e-mail and documents on the go without the bulk of carrying a laptop PC. REUTERS/Palm, Inc./Handout

The new “Foleo” is about the size of a hardcover book and, at 2.5 pounds, half the weight of other small laptop computers. It is designed to be used with a smartphone, to help business travelers better manage their e-mail and documents by offering a 10-inch screen, full keyboard and wireless technology.

Palm, best known for personal digital assistants (PDAs) and Treo phones, said it expects the Foleo to eventually work with rival smartphones such as Research In Motion’s RIM.TO RIMM.O Blackberry and Apple Inc.’s (AAPL.O) iPhone, although it has not discussed technology-sharing agreements with those companies.

Company founder Jeff Hawkins said he expected unit sales of Foleo — priced at $599 before a $100 rebate beginning this summer — to be smaller than Treo units sales at first.

“Ultimately, it will make smartphones more successful,” he said in an interview. “The volume we anticipate selling of Foleo initially will be small compared to the volume of Treos. It’s not going to be a driver in the short term. But it allows us to rethink how you design smartphones.”

The Foleo may signal a shift in focus for Palm, which dominated the market for personal digital assistants (PDAs) after it launched its original Palm Pilot in 1996.

Its PDA sales dwarfed those of rivals such as Hewlett-Packard Co. (HPQ.N) and Sony Corp. (6758.T)(SNE.N), but PDA demand dwindled early in this decade as similar features were built into cheaper mobile phones.

Palm’s Treo, which combines a phone with its PDA operating system, eventually became the company’s signature product with shipments of 2.3 million units in the last fiscal year.

Tim Bajarin, an analyst with Creative Strategies in San Jose, said mass appeal for the Foleo is not likely, since smartphones represent a fraction of the overall mobile phone market and only a portion of those customers will be interested in carrying a separate device.

Moreover, many business travelers are resigned to carrying a smartphone and a full portable computer.

“I will argue that this product is for the ‘road warrior.’ It’s not probably for mainstream, it’s more of a business tool,” said Bajarin, who noted that Foleo will compete with low-cost laptop PCs. “It will hit a nerve with a certain segment and in that sense has a lot of potential.”

With Foleo, Palm enters the burgeoning world of open source computing, a growing market of devices that are not based on the dominant operating system software made by the likes of Microsoft or Apple.

Open source developers traditionally write software that builds upon others’ work, and is distributed for free or at low cost. Palm’s device would also compete with Dell Inc. DELL.O, which last week started selling Linux-based PCs.

“One big unknown is what happens if the open source world decides to embrace (Foleo), as the first mobile Linux portable. It actually has potential ... if the open source world decides that this is a powerful way of expending the Linux franchise,” Bajarin said.

Separately, Palm Chief Executive Ed Colligan played down speculation that the company was for sale, saying that the new product proves it is working on innovation.

“We’re not focused on figuring out how to sell the company,” he said on the CNBC television network.

Shares of Palm were up 1.7 percent on Wednesday afternoon, rising 27 cents to $16.45 on the Nasdaq.

Additional reporting from Sinead Carew

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