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Palm CEO Ed Colligan says the company's long-awaited operating system of the future will center around the Internet, and be distinct from the familiar Palm OS that's currently available.

Palm has been somewhat tight-lipped about the future of its operating system development, but Colligan gave an interview to APC in which he described the "Nova" OS as a "next-generation operating system with much more capabilities, driven around the Internet and Web-based applications." Nova will be based on a Linux core and is scheduled to arrive next year.

Palm CEO Ed Colligan shows off several Treo smartphones, which are running the increasingly ancient Palm OS.

(Credit: Palm)

The idea is to return to what made Palm successful in years past, and what is making Apple's iPhone successful at this juncture: the development of a complete system, including hardware, software, and links to the outside world via the Internet or the desktop PC. Palm lost control of its operating system when it split from PalmSource in 2003, and it is still using a four-year old operating system on its Treo and Centro smartphones.

Colligan isn't going to make that mistake again. But it's not clear what Palm will bring to the table in terms of user interface, which was the big breakthrough that Apple made with the iPhone.

Designing a new smartphone around the Internet in the late 2000s isn't necessarily innovative; it's a basic requirement. The real innovation in handheld computing is around how people interact with their computers, and we'll have to see what Palm cooks up in that regard when Nova is ready next year.

Palm will continue to release devices based on the classic Palm OS, Colligan told APC. The Centro, a bright spot for Palm amid the troubles of the past year, will continue to use the classic Palm OS to help keep that phone at around $99. And Palm will also continue to pitch Windows Mobile Treos for business customers even after the release of the new operating system, he said. Nova will be used on something in between a Centro and a Treo, but the company has yet to decide on the naming convention for that new category.

While it's been a rough couple of years for Colligan and Palm, he remains optimistic, drawing on the experiences of many of his current colleagues when they worked at Apple.

"So just looking at Palm's situation today there's no logical reason, in a market with this kind of growth opportunity and the dynamics that are happening and how quickly things change--and again you could look at Apple and the iPhone as something that's come out of nowhere, essentially, and changed the dynamics of the smartphone space--there's every opportunity to do that in our case as well," Colligan said.

Suddenly, it seems even more fitting that a company called Elevation Partners recently took a stake in Palm.

This might be rock bottom for the storied mobile-computing company. The decision to cancel the Foleo even before letting people get their hands on it is an embarrassing admission that Palm's vision of the computing world is way off base from the rest of the world, and it's a black mark on the otherwise stellar career of Palm founder Jeff Hawkins.

It's hard to dump too much on Hawkins. The man invented the Palm Pilot and the Treo. I once invented a novel method of stacking beer cans in a fridge (the key is not to buy any food). But after Hawkins unveiled the Foleo at the D: All Things Digital conference--arguably the most prestigious gathering of the computing elite--with proclamations like "it's the best idea I've ever had" and "the most exciting product I have ever worked on"--Palm's decision to cancel it without even a product launch must be mortifying for Hawkins.

Now, Hawkins has his own company, Numenta, which is trying to develop a computer that works like the human brain. If he pulls that off, we'll forget all about the Foleo.

But what is Palm going to do? Speaking of mortifying, Ed Colligan must be wondering why he gave Hawkins $10 million to go down into the basement and come up with Palm's Next Big Thing, only to emerge with the Foleo. Almost universally panned by analysts and bloggers, the Foleo was a lightweight Linux "mobile companion" that was designed to read e-mail, but didn't work with corporate e-mail software from RIM or Motorola, among a multitude of other sins.

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

(Credit: CNET Networks)

Palm has squandered its position in the mobile-computing world by failing to improve its operating system since 2004, come up with a noticeably different Treo since the Treo 600, or clearly articulate any vision of where the company thinks smart phone development is headed. The company wisely hooked up with Microsoft to ship Windows Mobile Treos, otherwise this post might have been written a year ago. But it has watched companies like Motorola, RIM, LG, Nokia and even Apple pass it by while it tried to make its biggest splash of the year with a product canceled just three months later. Imagine the reaction if Apple had canceled the iPhone in April.

Jack Gold of market research firm J. Gold Associates thinks Elevation Partners is starting to throw its weight around a little. "Hopefully they are coming in and cracking the whip and making them do the right thing," he wrote in a research note distributed Tuesday. After all, Palm clearly still hasn't found what it's looking for.

Palm also announced Tuesday that Bruce Dunlevie of Benchmark Partners is resigning from Palm's board, while Scott Mercer will stay. Mercer was going to resign from the board to make way for Fred Anderson and Roger McNamee of Elevation Partners, but now Dunlevie (who's also on the board at Numenta) is out. Anderson and McNamee haven't formally assumed their positions yet as the deal hasn't formally closed, but perhaps their impact is already starting to be felt.

While it's embarrassing, Colligan made the right decision. You've got to know when to fold them, and the Foleo wasn't going to beat anything better than a pair of sixes.

You're supposed to have an intervention after the downtrodden hits rock bottom, but Colligan's moment of clarity could still allow Palm to recapture some of its past glory.

However, Palm better think long and hard before the next time it tells people it's about to change the world of mobile computing. The company is in danger of watching a category it helped create leave it in the dust.