February 21, 2008 4:00 AM PST

Palm Foleo: Not such a dumb concept after all?

If the sudden rush into subnotebooks by major PC vendors is any indication, it's worth considering whether Palm's Foleo wasn't such a lame idea.

Photos of a subnotebook from Hewlett-Packard, reportedly called the HP Compaq 2133, showed up on the Web recently. And another major PC vendor, Acer, is also rumored to be entering the subnotebook fray sometime soon. Neither company will confirm anything, but in the case of the HP Compaq device, an industry insider tells us the product is for real and that the company began seriously looking into the category in November 2007. When the device will come to market, however, is still a question mark.

Palm founder Jeff Hawkins (right) shows The Wall Street Journal's Walt Mossberg the Foleo.

(Credit: CNET Networks)

But there's likely to be even more news on this front in the next few months. So what's the genesis of the sudden interest in this category? It's easy to point to the Eee PC from Asus and its surprising and instant popularity. But the Eee wasn't the first to employ the broader concept of a mobile Web device that looked like a notebook PC, but was meant to function more as a secondary device. That was the idea brought to us by Palm founder Jeff Hawkins with the Foleo.

Hawkins, who invented the Palm Pilot and the Treo, insisted the Foleo was "the best idea he'd ever had." The product was roundly panned by critics and eventually dumped before it even came to market late last summer.

The idea of a small form factor computer that is tinier than a notebook with solid-state memory, running a light operating system, Web access for e-mail is being tweaked and advanced by some of the biggest names in computing.

It's happening despite the fact that it's still a vastly unproven category of computing, and previous attempts to define such a middling type of device (see: UMPC, MID) have largely failed. So what's different?

The attraction to devices like the Eee PC, and the XO from OLPC, is partly form factor, but mostly price. At $399 for the Eee and $400 for the XO (that gets one for you and one for a kid in a developing country), they're not necessarily functional as fully loaded primary PCs, but at those prices, you're not going to expect it to be. More importantly though, at that price it severely undercuts notebook PC leaders HP, Acer, Dell, and Lenovo.

Not coincidentally, the impetus for HP's experimentation in this category was its concern over the very low price tag Asus was able to stick on the Eee PC. Selling the mini-notebook at $399, even if it's a secondary PC and runs Linux, gives it a serious chance to further chip away at the already-declining average selling prices for notebook PCs. (The 2133 from HP will have an entry level model priced at $499, and will have a Via processor, we're told.)

But that kind of pricing also could represent a good opportunity for the HPs and Acers of the world. This type of subnotebook is aimed at a very narrow group of users, and that's not necessarily a bad thing, according to Stephen Baker, vice president of industry analysis for The NPD Group.

The pricing shows "it's not focused on being people's primary computer," he said. "Like the MacBook Air, like the Eee, like the Foleo was going to be. We tend to think of them in the context of other notebooks or portable devices, but they're really not designed to be a primary portable device. It's designed to be a niche product that focuses on a very specific usage model."

But what is that usage model? There's not even an agreed upon term for this category. Subnotebook? UMPC? Super mobile Internet device? Or as Intel is apparently ready to call it, Netbook? That definition is important to the consumer. The lack of clarity as to the purpose of the Foleo was a major reason it didn't strike a chord with a lot of consumers.

"The tough part is, this type of product is trying to navigate narrow space between a notebook and a smartphone. It can't compete with a smartphone in terms of price and portability, but it can outperform a smartphone," said IDC analyst Richard Shim. "But at the opposite end of the spectrum, these OEMs don't want to compete with notebooks directly because they don't want to disrupt the growth engine and significantly (hasten) the decline in ASPs."

So was the Foleo as silly as Hawkins' harshest critics said? Maybe the execution and timing was off. Or more likely, he was on to something, but wasn't quite able to take the idea to the next logical conclusion. In fairness to him, he did recognize at the time that the Foleo's utility may not have been as obvious to the mass consumer as he'd hoped.

"The further out you are, the more people have trouble understanding. It's hard to go back in time, but when we did the Pilot, there were a lot of people that thought that was a stupid idea. I mean a lot," he told CNET News.com last year.

Maybe he'll be vindicated--at least partially--on this one too.

Originally posted at News Blog

Erica Ogg is a CNET News reporter who covers Apple, HP, Dell, and other PC makers, as well as the consumer electronics industry. She's also one of the hosts of CNET News' Daily Podcast. In her non-work life, she's a history geek, a loyal Dodgers fan, and a mac-and-cheese connoisseur. E-mail Erica.