Reports indicate that Palm is going to release a new budget phone rumored to launch this fall at AT&T. The upcoming handset is said to rival the iPhone with a smaller price tag. The Palm Eos is a candy bar with a non-slideout QWERTY keyboard.

According to Engadget, the new phone will cost about $99, after a $250 rebate, and will come with 4 GB of internal memory, a 2 megapixel camera with flash and video recording capabilities, A-GPS and Palm’s WebOS.

The handset is 10.6 mm thin and weights about 100 grams. It comes with a 2.63 inch touch screen that brings 320 x 400 pixels resolution. Eos will be an HSDPA capable phone with extra connectivity capability via its Bluetooth 2.1 and a micro USB port.

Eos will launch Palm’s new and unreleased WebOS that will offer the handset SMS, MMS – both picture and video – an integrated instant messaging client, contact sync with AT&T, audio playback for various files and video playback for MPEG4, H.264 and H.263 formats.

The handset is rumored to be launched at AT&T, however, as you might guess, there is no information regarding its availability or price tag.