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In Netbook Category, Palm Founder Reboots

BY PATRICK SEITZ

INVESTOR'S BUSINESS DAILY

Posted 8/7/2008

Handheld computer pioneer Jeff Hawkins was on to something when he proposed a new type of device, a cross between smart phones and traditional notebook computers in May 2007.

Hawkins, founder of Palm (PALM) and still an adviser there, unveiled a product called the Foleo at last year's D: All Things Digital technology conference. Tech writers quickly panned the device, comparing it unfavorably to traditional notebook computers. Blogs mocked it as the "Fooleo" and called it "the folly of Jeff Hawkins."

Palm canceled the Foleo project three months later, and within weeks of its launch, to focus instead on its struggling, core Treo smart phone.

But today, the category Hawkins envisioned is one of the hottest new tech product areas. Leading PC makers like Acer, Dell (DELL) and Hewlett-Packard (HPQ) have jumped into the market with similar Internet-connected devices that bridge the gap between smart phones and larger notebook computers.

Hawkins is pleased the PC giants have validated the market, but he sees much room for improvement among their early so-called "netbooks."

Hawkins spoke to IBD recently about his netbooks and, for the first time at length, on his experience with the Foleo.

IBD: Did you have a falling out with Palm over its handling of the Foleo?

Hawkins: No. There was not really a falling out over it at all. Businesses have to make decisions and do various things. I like everyone there. I'm friends with them. I'm not working there as much as I used to mostly because I have my interest in neuroscience. Seven years ago, I started running a neuroscience institute. That's when I started working part-time (at Palm). And now I'm affiliated with Numenta, a startup, so between the neuroscience research, Numenta and Palm, I'm stretched a little thin.

IBD: When Foleo was announced critics questioned this category. What's your thinking about it now?

Hawkins: As far as I know the category hasn't taken off yet, but there's interest in it.

My opinion has been pretty consistent. When I conceived of the Foleo, which was actually many years ago, it was like a real epiphany for me. I said, "Oh my gosh, people are going to want a small, lightweight solid-state computer" and there would be a demand for it. I personally wanted that product a great deal. I'm a frustrated computer user — I don't particularly like using computers. I was very excited about Foleo and I'm still excited about the category. And I never lost any of my excitement for it, even though Palm decided not to launch the Foleo.

I think there's a world of people out there that's dying for it.

When we announced the Foleo, we made some mistakes. We were at the D conference and immediately all the techno-bloggers were writing all these negative things about it. But I went around and I talked to people and people came up to me, a lot of people. And it was about 50-50 — 50% of the people said, "Oh, it's too weak and it's underpowered. Who wants something like that?" And the other 50% said, "Oh, my God, that is exactly what I want. All I want is the smallest thing to carry that does a good job with e-mail and Web browsing. I want this thing."

In the latter category there were more women (and) people who were more concerned about the weight of carrying things around and people who just didn't care about having the latest and greatest and most technical sophistication. They wanted a little simplicity. I think there are a lot of those people out there, an awful lot. And the technology world doesn't acknowledge them as much as they should. They aren't the people who write the blogs. They aren't the people who evaluate technology products.

If anything, my career has shown me that there's a demand for simplicity and size reduction.

I'm still convinced it's a great category ready to really take off.

IBD: What do you think of the first-generation netbooks and other lightweight Internet-connected notebooks on the market?

Hawkins: I'm critical of some of the products that are coming out. I think the keyboard has to be a real keyboard. With the Foleo, we picked the smaller of two standard-sized keyboards. It would still be considered a full-sized keyboard. We essentially designed the smallest product we could around that keyboard.

You really want to be able to touch type. Some of the products that are coming out, they went a little too small.

Then you want a screen that's big enough to see real Web pages on full width. And you're not thinking it's a dinky screen.

But you don't need to go super big, like with what Apple did with its Air product. They went too big in my opinion. It's thin, but it's too big.

I can't tell you how many people showed me their small bags or their purses and they said, "If I can just fit it in this."

There is a tremendous number of people who just need good Web access, good e-mail and writing (in a portable device). And if you create that product and it's successful then people will develop other software for it. Other apps will come along eventually.

I've looked at a couple of the (new netbook-type products) and haven't seen one yet that hits the right set of ingredients to really be successful. But they're getting closer.

IBD: You mentioned that mistakes were made in how the Foleo was debuted. Can you elaborate?

Hawkins: One thing we decided to do, which in hindsight was a mistake, was we announced this thing at D, which is not a typical place to do a product launch. And also the marketing team decided to do a whole bunch of these online videos and sort of a Web launch.

The problem with the Web launch thing is that it allowed people to see a video of the product or me, but not actually use the product or see it firsthand.

I found that people were writing all kinds of things about it and they had never seen the product firsthand. You don't really know what it's like until you put your hands on it. It really was a delight to use. And so people were writing blah-blah-blah negative things.

People who actually saw it in person formed a much more positive opinion. They'd say, "Oh, it's a lot smaller than I thought it was" or "It's really amazing how fast it is" and "I can't believe how important this instant-on (feature) is. I never understood how important it was until I actually had one."

And so this idea of launching it in a virtual way, where we had a lot of people reporting on it and writing about it who weren't at the D conference, who couldn't see it and had no way of asking questions about it, led to a lot of misinformation and negative press.

IBD: Why didn't Palm have the confidence in Foleo to go forward?

Hawkins: I don't think that Palm didn't have confidence in it. Palm has its issues and challenges. At the time, they were in the process of closing this major financing, restructuring deal with Elevation Partners.

And as part of that deal, they brought in Jon Rubenstein, who's a great guy. He was at Apple (AAPL) and did all the iPod stuff. He came in basically to take over product stuff, because I really hadn't been running the product design center at Palm for several years. They came in with a particular strategy that they wanted to pursue at Palm, and that strategy didn't have room for Foleo.

It was clear Foleo had technical issues. It was a first-generation product. We'd have to launch it and then do another gen within a year. And that's a big commitment of people and dollars.

It was a strategic decision to pursue a different approach. I don't think they made a mistake. We haven't seen the outcome of that decision yet. It really was not acrimonious at all. It was just business.

I'm a little disappointed, only because I loved the product concept. I'd really like to own one. And I'm a believer in it. And I'd love to end my design career at Palm with a success there.

They may still come back to it. They haven't totally written it off.

IBD: So you didn't get to keep a Foleo?

Hawkins: Oh, I have one. Oh, yeah, I got to keep one. I have the beta release. The hardware is very reliable. It works great.

IBD: I thought Palm destroyed them all.

Hawkins: No. They didn't destroy them all. I think quite a few people have them and like them. They're all Palm employees because you can't get support on them, of course. The team of people at Palm who worked on them has them. There are some real fans there.

IBD: Wasn't there a product that was actually packaged and ready to ship?

Hawkins: It didn't get that far. We had designed the packaging. It was nice design packaging. We had not really gone into production. They had built preproduction quantities. It wasn't like there was a warehouse full of these things.

IBD: But Palm was close to shipping the Foleo, right?

Hawkins: I forget the details, but we were on the verge of "Do we pull the production trigger or not?"

When you design a product like that, you have to do a preproduction run that might have been anywhere from 500 to 1,000 (units), just to make sure you can build them. So there were hundreds of them out there, maybe a thousand. But they never were packaged and put in for delivery. And I don't think we ever did a final production release of the software. It was very, very close.

A condensed version of this interview appeared in IBD's print edition.