Dawn of the Ultra-Mobile PC

Meet the 'tweener: not just a smartphone, not quite a laptop. Palm, Microsoft, and Intel are betting you'll want one

by Steve Hamm and Cliff Edwards

When Jeff Hawkins speaks, people in the tech business take heed. After all, Hawkins, founder of Palm, has invented three breakthrough gizmos—GRiDPad, one of the first tablet computers; PalmPilot, the first hit personal digital assistant; and the Treo smartphone. So the tech world was buzzing when Hawkins strode onstage at the D: All Things Digital conference on May 30 in Carlsbad, Calif., to reveal his latest brainstorm: Foleo.

It's an ultracompact computer with a twist. Palm is positioning the sleek clamshell device, which will sell for $499 after a rebate, as an alternative to carrying a larger, conventional laptop. It offers a nearly full-size keyboard, a 10-inch display, and comes with a selection of applications including a word processor and spreadsheet. But Hawkins believes it will be most useful when people also carry smartphones, like Treos or BlackBerrys (RIMM), and transfer e-mail to Foleo when they're in sit-down mode. "It's a companion to your phone and companion to you," Hawkins says.

Ready or not, here come the 'tweeners. Palm (PALM) and its Foleo are just the latest evidence that the electronics industry is determined to create a new category of mobile computing devices. Samsung Group, Sony (SNE), Nokia Corp. (NOK), HTC, Fujitsu (FJTSY), and Vulcan Portals have also introduced or previewed products that are smaller than laptops yet larger than smartphones. The idea: offer businesspeople something very small—pocketable, in some cases—that's an alternative to carrying a laptop around town or on a short business trip.

With our pockets and carryall bags already bulging with cell phones and BlackBerrys, do we really need a whole new species of gadget? The electronics industry is betting we do. Laptop computers are more popular than ever, far outpacing the sales growth of desktops, with more than 81 million sold in 2006. The smallest laptops, called subnotebooks, weigh as little as 2 lbs. Smartphone sales are soaring, with more than 71 million sold last year. Meantime, demand is plummeting for PDAs because they can't make phone calls or run many desktop computing applications.

Seeking Novelty

But it's not clear at all which of these gadgets, if any, the 'tweeners will replace. Most of the new machines are still too large to fit into a pocket or not capable enough to replace a notebook PC. The priciest top $2,900—far more than the average subnotebook. And Hawkins' presentation for the Foleo, impressive as it was, left some of the computing cognoscenti scratching their heads: Are people really looking for a companion to their phone? Will hard-core business types choose a computer that runs the Linux open-source operating systems rather than Microsoft's (MSFT) Windows? "The yet-another-device philosophy doesn't carry, so to speak, and it's sure as hell not the future of mobile computing," sniffed blogger Ryan Block on the popular Engadget technology Web site.

There's no mystery about what's driving the 'tweener phenomenon. The computer industry is looking for new things to sell as the traditional PC market matures, revenue growth slows, and profit margins become even thinner. At the same time, mobile-phone makers want to develop products that fetch higher margins than commodity phones. So they all need new gadgets to get customers excited enough to open up their wallets.

As is often the case with new tech product cycles, the backroom power brokers are Microsoft and Intel (INTC).