On Jan. 8, Palm (NSDQ: PALM) is expected to use the Consumer Electronics Show in Las Vegas as the venue to unveil its new operating system, code-named Nova, which is expected to fulfill the “fat middle of the market,” BusinessWeek reports. The fat middle means the new operating system is expected to bridge the gap between Apple’s iPhone, which is mostly fun, and Research In Motion’s Blackberry, which is down to business. Palm’s CEO Ed Colligan told BusinessWeek: “People’s work and personal lives are melding.”

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It won’t be easy. BusinessWeek points out that the company’s stock has plummeted 80 percent in less than a year, and the company is running low on cash with reserves likely only last about six quarters. Competition is also mounting with other phones already for sale, including the iPhone, Blackberrys and phones based on Google’s Android operating system and Microsoft’s Windows Mobile. Not to mention, the idea of designing a product for both work and fun isn’t new either. I’m not sure if Microsoft (NSDQ: MSFT) coined the term, but they use the term “prosumer” regularly to describe someone who wants both personal and work functionality in the same device.

Palm is optimistic. Mike Bell, a 16-year Apple (NSDQ: AAPL) engineering star who joined Palm last year, said: “I’m fundamentally convinced we’re onto something huge. Some of the stuff we’re working on here is mind-blowing—better than anything I’ve seen before.” The expectations also seem to be realistic. One exec in the article said that getting 2 percent of the overall market would be fine. Investors are also thinking long-term: T. Rowe Price analyst Dave Eiswert, whose firm owns 15 percent of Palm, figures if the company sells three or four products in 2009, he thinks 2010 sales would rise 150 percent to $2.4 billion. Even moderate success would lift the stock from 2.20 to 20, or many times that if Nova is a hit.