It pains me to see how Palm’s gone sideways technology-wise, but it must drive the company’s founders absolutely nuts.

Here’s hoping that at the company’s announcement tomorrow, which is part of DigitalLife in New York, they begin to do something about it.

There’s a lot of work to do.

I covered Palm for several years as a business reporter for the San

Jose Mercury News, where I watched the company launch an IPO and burn

through three CEOs (Donna Dubinsky, Carl Yankowski, Todd Bradley).

Especially in the early days, I found the company fun to cover for many

of the reasons I liked covering Apple Computer and its iPod: Here was an outfit

where the executives dreamed big about game-changing devices, where

they brought together hardware and software and took total

responsibility for the user experience.

I remember going to see Ed Colligan, back when he was president of Handspring, and interviewing him about the coming launch of the Treo 600. He was determined to sell me one. I already had a Samsung i500, and was intrigued by the 600 – but I worried about dropping $600 on a new phone and later discovering it wasn’t worth it.

“If you buy this phone and don’t love it,” Colligan said, “I will personally buy it back from you.” He stared across the table at me. “Seriously.”

I was impressed, but six benjamins is still a lot to drop on a phone, so I didn’t take him up on it. (I later bought one, and have been a Treo user for about two years – so Ed, you win.) Still, it showed the commitment Colligan had to the product the team had created.

Fast forward three years, and the Treo is only marginally better than it was in 2003. Why? I don’t blame Palm, a company that I know has tons of smarts and ideas. I blame PalmSource, the Palm spinoff that owns the operating system and has proven unable to innovate its way out of a paper bag.

The spinoff of PalmSource, which is now owned by Japanese company Access, has been an unmitigated disaster. Before the Access buyout, PalmSource bought the BeOS in 2001, and in the process basically brought a team of experienced software engineers on board. Somehow the company failed to produce a meaningfully advanced operating system. More recently, almost two years ago, PalmSource bought China MobileSoft with an announced strategy of using its engineers to spread the Palm OS to the cheapest of phones.

So a Japanese-owned company bought a group of Chinese software engineers to create a product largely serving U.S. customers in the U.S. market. Less than shockingly, PalmSource has produced nothing revolutionary in two years. The company’s efforts have been so inept as to drive Palm into the arms of Microsoft.

The fact that Palm hasn’t sold to some other outfit suggests to me that they’ve still got a lot of fight in them – perhaps they’re determined to chart their own course and return to their mission of making phones that aren’t a nightmare to use.

To do that though, Palm is going to have to seize back control of its software destiny. I’m not sure how that happens in a world where Symbian, Windows Mobile, Palm OS and Linux have become the undisputed leaders with tens of millions of units sold.

But it’s not going to happen just by making slimmer phones with brighter screens and a rearranged button layout every couple of years. Software is at the core of the problem with today’s phones, and it will have to be at the core of the solution.