Seriously, I'm scratching my head trying to figure out what a company that's fallen so far behind in the innovation department is doing introducing something like the Foleo², which is basically a mini-laptop with limited capabilities.

Palm created the Foleo to serve as a lightweight "mobile companion" to smartphones like Palm's Treo. The two devices can sync wirelessly via Bluetooth and Foleo can be turned on and off instantly. Essentially, the Foleo, which will be released later this summer, will serve as an extension of the smartphone, allowing users to take advantage of Foleo's 10-inch screen and full-sized keyboard. But the meager benefits of the Foleo don't extend beyond there.

Palm really needed to be swinging for the fences with this latest launch, but right now it looks like the Foleo is a swing and a miss. That's not good news for Palm, which has been struggling to maintain market share as the smartphone field grows increasingly crowded. Nokia (NOK³), Motorola (MOT⁴) and BlackBerry-maker Research in Motion (RIMM⁵) already have popular handheld gadgets on store shelves, and later this month Apple (AAPL⁶) is expected to release its widely anticipated iPhone.

The competition is also proving more successful. In the past year, for example, RIM's shares have skyrocketed 156% while Palm's stock is trading at roughly the same price as it did this time last year. Bringing a new device to market was certainly one way to try and shake things up at the company. However, beyond the constantly emailing road warrior, I can't think of too many people who would really need this device in their electronic arsenal. Todd Kort, an analyst at independent research firm Gartner, estimates that maybe 1% of the PC- and smartphone-owning population might be interested in this device.

The problem is that the Foleo doesn't replace anything — not your laptop, not your smart phone, not your digital music player — and it doesn't offer much more than the ability to edit your Word or PDF documents, browse the web and write emails. For example, there's no hard drive so it can't store your documents. Why would you abandon your laptop then? You can't play digital music or videos on it so you better not leave your iPod at home.

I'm left to think that the Foleo is just another 2.5 pounds' worth of electronic equipment to stow away in my already-overburdened carry-all. Not only that, other companies have already tried and failed at this hybrid sub-notebook game.

"Palm is introducing [Foleo] into a dead man's zone in the handheld space," explains Carmi Levy, a senior research analyst at independent tech research outfit Info-Tech Research Group. "Many vendors have tried to succeed here and failed miserably."

Microsoft (MSFT⁷), Intel (INTC⁸) and Samsung's efforts to get the super-light touch screen tablet PCs known as Ultra-Mobile PCs, or UMPC, off the ground have had little success since their introduction in the spring of last year. I should point out that the Foleo isn't exactly a UMPC. At $499 (following a limited time $100 rebate), the Foleo is roughly half the price of a UMPC. The Foleo also offers five hours of battery life, about twice that of a UMPC. But the benefits stop there. The lower price and longer battery life are due to some significant tradeoffs. Not only are UMPCs lighter, weighing in around two pounds, they offer a lot more functionality because they have hard drives that allow them to store data and run a much wider range of applications.

Of course, because the Foleo runs on the Linux operating system, developers could create more applications for the device. But that's going to take a lot of time and effort on Palm's part. "Palm is really going to have to evangelize this and try to get Linux developers to write software for it," says Kort. "Until there's an installed base, however...there's not much incentive."

I'll give ThinkEquity Partners analyst Jonathan Hoopes some credit for noting that the Foleo at least "validates Palm's Linux development efforts." The Foleo is indeed the first Linux-based offering out of Palm since it announced plans to use the open-source software to replace its archaic Palm operating system software. But I'm not sure the selling point of Linux alone is going to make the Foleo fly.

"Though we believe the Foleo is a nice product, we would have preferred to see Palm's R&D efforts going into improving the Treo's bulky design, enhancing the Palm OS, or generally increasing the differentiation between Treos and competitive smartphones," wrote Needham & Co. analyst John Lynch on Thursday. Lynch has a Hold rating on Palm's shares.

I agree. Out of all of the initiatives that Palm could've embarked on to reignite its profits and reputation, I believe the Foleo was an ill choice. Meanwhile, I expect the company's shares will continue to tread water — at least until more takeover speculation⁹ rears its head again.