The first I heard about the Foleo was when Senior Technical Editor and guru extraordinaire Jason Perlow sent me an email with the subject header "Are they f--king retarded?" Of course, he spelled out the third word completely.

I had to agree. To introduce a product that's about the size of a small laptop for about the price of a small laptop, but with only a fraction of the functionality of a small laptop -- and no cool value -- was just poor planning.

What was sad was Jeff Hawkins should have known better. There's been a long list of almost-laptops introduced over the years that have all failed miserably. To succeed, either the Palm product would have had to do everything a laptop could do (it couldn't) or do at least one thing radically better or insanely cooler (it couldn't).

This is when Palm could have benefited by learning from Apple. Despite all of Apple's faults, one thing Apple does exceptionally well is build excitement. And they do this by building exciting products. While the iPhone isn't a smartphone and isn't really a particularly good phone, it's a fabulously cool phone. And the cool generated excitement, craving, and, ultimately, demand. In fact, the iPhone outsold all smartphones in July -- including Palm's own Treo.

Of course, since Apple dropped the price of the iPhone by $200 just two months after shipping the first iPhone, there's no doubt Apple's not big on creating customer loyalty through treating customers well. Rather it keeps customer loyalty despite it's behavior as a rather nasty company -- and that's solely because its products are so frickin' cool.

[After I wrote that, I learned that Apple is giving early customers a $100 at the Apple online store. It's not going to make things better, but it is a concession.]

The Foleo generated neither excitement nor craving. Just incredulity. Palm claims they haven't given up on the Foleo idea, which should worry Wall Street a lot. However, there might be a market for something cooler, more exciting, and more viscerally neat than a typical laptop -- and if there is one, Apple's likely to be the company to make it. Palm makes great products, but they just can't compete on cool with Apple.

Palm needs to both be praised and spanked for dumping the Foleo. They should be praised because they did eventually figure out this was a sure loser, and they discovered it before losing even more money (Ed Colligan estimates they're going to lose $10M on this boondoggle). Sometimes you have to dump your dogs and it took guts to kill this one.

Palm should be spanked because they've yanked the chains of a number of independent developers who can't afford fruitless development exercises. These developers built Foleo-specific versions of their products, at considerable cost they likely couldn't really afford, and all that work also has to go into the crapper.

Palm is rapidly losing developer loyalty and this sort of thing doesn't inspire long-term trust. My recommendation: move that $10M loss to an $11M loss and compensate the developers for their wasted time. In the long term, that extra million bucks will more than pay for itself in increased developer loyalty.

For more than 20 years, David Gewirtz, the author of Where Have All The Emails Gone? and The Flexible Enterprise, has analyzed current, historical, and emerging issues relating to technology, competitiveness, and policy. David is the Editor-in-Chief of the ZATZ magazines, is the Cyberterrorism Advisor for the International Association for Counterterrorism and Security Professionals, and is a member of the instructional faculty at the University of California, Berkeley extension. He can be reached at david@zatz.com and you can follow him at http://www.twitter.com/DavidGewirtz.