Psion: Why we quit handhelds

Psion: Moving away from handheld computers

By BBC News Online's Emma Clark

Psion has defended its decision to pull out of the market for handheld devices by saying it was making a "move up the value chain".

"Is it a market we want to be in right now?" Psion's Peter Bancroft asked rhetorically.

Would we want to be a Palm right now?

Peter Bancroft
Psion

"It has tiny margins and is becoming commoditised (like the PC market) very quickly."

Instead the company hopes to benefit from licensing its intellectual property, in the same way that ARM Holdings, a UK chip designer, does.

"Not that we would compare ourselves to ARM," Mr Bancroft told BBC News Online.

"Right now, we don't look like a successful company."

Evolving

However, Mr Bancroft was careful to portray Psion's change of strategy as a move to evolve, rather than a step backwards.

"Would we want to be a Palm right now?," he added, referring to the tough trading conditions in the handheld personal digital assistants (PDAs).

"The answer is no."

Rather Psion has chosen to concentrate on its investment in the Symbian consortium's mobile phone software operations, and its own digital network operation for businesses.

Symbian, a joint venture with some of the world's biggest mobile phone companies, owns an operating system that will allow new-generation mobile phones, PCs and handheld devices to communicate with each other.

Mr Bancroft represented the new focus on Symbian as a "move up the value chain".

"We created Symbian out of our experience in developing organisers," he added.

The company has also recently sold rights for one of its chips to Parthus Technologies.

Bluetooth

As part of the new plan, Psion has also abandoned its planned Bluetooth-enabled products for consumers.

Bluetooth products include PCs and phones that are linked by radio waves, eliminating the need for cable connections.

Mr Bancroft said that Psion could consider returning to the Bluetooth market if there was a change in demand for the technology.

However, he said Psion would be unlikely to come back on its own, seeking instead to form partnerships.

For the time being, the company sees "no commercial logic" in continuing to develop Bluetooth products.

Support for handhelds

Despite the company's decision to stop the design and production of new handheld devices, it is adamant that it will continue to support its existing PDAs.

"There is no question of leaving users high and dry," Mr Bancroft said.

There is no question of leaving users high and dry

Peter Bancroft
Psion

In total, Psion has sold between five and six million PDA units since it entered the business in the 1980s.

He added that Psion would continue to support the products for as long as it continued to sell them into the market.

Ironically, back in March chief executive David Levin maintained that the company would remain committed to handheld computers.

He said Psion's products would be highly differentiated from its competitors but would remain mass market.

Mr Bancroft defended Mr Levin's comments, saying that he had not been disingenuous because Psion will continue to support its handheld PDAs.

However, analysts said that the move meant "effectively it's all over" for the company's handheld business.

Brighter prospects

The company's business-oriented division, called Psion Teklogix, is believed to have brighter prospects.

In March, Psion said there are "consistent growth opportunities" in Teklogix's industrially oriented markets.

Psion's networks allow businesses, such as Volkswagen, to track the movement of parts with a digital tag from warehouses through to other company sites.

Even though many companies are cutting back on IT costs, Psion is confident that its systems will continue to sell.

Mr Bancroft said that its North American enterprise business has only just been hit by the slowdown.

He also said that the company's business systems usually pay for themselves within a year.

However, the company has just flagged up potential risks to its business in Europe.

Lost money

The restructuring will mean a charge of £29m to provide for the redundancy costs, any money spent on developing Bluetooth products and other expenses.

When the company unveiled its full year results in March, it revealed losses of £1.4m.

Following news of the restructuring, Psion's shares fell almost 20% in early morning trading before recovering.

Mr Bancroft argued that the recovery in the company's shares indicated relative market confidence in the new strategy.

"The market is not panicking," he noted, adding that the shares had come back following the company's briefing of analysts on Wednesday morning.