By Eydie Cubarrubia<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Palm hopes to begin clawing its way back to the top of the handheld market after unveiling on Wednesday a “mobile companion” that is designed to bridge the gap between smartphones and laptop computers.

The Linux-based Foleo looks like a notebook with a 10-inch screen and full sized keyboard and is designed to provide a better interface for Palm smartphone owners.

The company showed off the gadget—which users can instantly fire up to send and receive email, edit documents, and browse the Internet—during a presentation at the D: All Things Digital conference in <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Carlsbad, California.

Foleo marks Palm’s first product built on the Linux open source operating system. The company said in April it was preparing to release Linux products, a step that observers have speculated could put it back on top of the handheld space by making its products both cheaper and more robust.

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Linux phones cost as little as $60 and $70 to manufacture, and can also make possible rich features like email and multi-media, which some say are harder to create on mobile’s more dominant Symbian and Windows systems.

Though Linux-based, Foleo is compatible with either the Palm OS or Windows Mobile versions of the Treo—and could become compatible with phones made by other companies. “Palm expects to work with third-party developers to support as many smartphones as possible,” the company said in a release.

Palm’s new product arrives amid growing competition from Research In Motion’s Blackberry handheld device. It also comes just before the release of Apple’s much anticipated iPhone. Palm shares were up $0.41 to $16.59 in recent trading.

At least one analyst had expected a Linux-run Palm gadget to debut. “Management indicated the new platform has been in development for a number of years, will take personal computing mobile, and will be based on a Linux core,” UBS analyst Maynard Um said Wednesday in a research note.

Oppenheimer analyst Lawrence M. Harris said in April that Palm’s adoption of Linux “should allow future versions of the Treo to take advantage of the simultaneous voice and data capabilities of [cellular providers’ advanced] WCDMA networks” (see Is Palm Linux’s Savior?).

Mr. Um said he expected Palm’s new device “could be greeted positively, particularly if the company is able to deliver a more compelling form factor or differentiated application or usability.” The Foleo seems poised to do that.