Ailing Psion targets business market

Sales of Psion's handheld computers are set to decline this year

Shares in Psion have slumped to a two-year low after the firm, famed for its palmtop computers, repackaged itself as a business-to-business company in a drive to stem losses.

The price of Psion shares plunged 18%, to their lowest level since January 1999, after the company revealed losses of £1.4m, and unveiled a shake-up of consumer operations.

The firm revealed that it is to merge the handheld computer division, which is set to report a drop in sales this year, with its modem and home technology arms.

The shake-up will see the company refocused around its business-oriented division, Psion Teklogix, which directors believe has brighter prospects.

Psion believes there are "consistent growth opportunities" in Teklogix's industrially-oriented markets, the company said in a statement on Thursday.

Motorola blow

The restructuring follows Motorola's decision in January to pull out of the joint Odin phone and data project.

Results snapshot

Turnover: 219.7m (+46%)

Pre-tax loss: £1.4m (£4.7m profit in 1999)

Turnover by region

UK: £50.4m (+6.4%)

Continental Europe: £103m(+38%)

North America: £48.7m (+139%)

Rest of the world: £17.6m (+120%)

Data for year 2000

Psion said on Thursday it would not pursue the scheme independently.

And it trimmed optimism over prospects for the market in mobile internet devices.

The level of debts run up by telecoms firms winning licences for next generation mobile phones is "in turn affecting the supplier industries", Psion warned.

And weak consumer demand for Wap phones, and the slow roll out of high-volume telecoms networks, are also hitting the sector.

"Consequently the roll-out of integrated data-enabled devices for cellular markets has been delayed and faces an uncertain period," Psion said.

Job cuts

Psion's restructuring, which will save £17m in costs and axe 100 jobs, "will be challenging", the firm said.

But "it is essential that we tackle the task now so that Psion can re-establish profitable growth more widely", the briefing said.

The focus on Teklogix operations will allow Psion to exploit a division with a strong management team and worldwide sales, with customers including UPS and Toyota.

The business has just finished installing a wireless communications network which will allow carmaker Volkswagen to track deliveries more efficiently.

Psion group's chief executive David Levin said: "Helped by contract wins like this - the outlook for 2001 is for good growth and profitability."

City reaction

In the City, Psion shares stood down 29p at 125p in lunchtime trading.

The price of the shares topped 1450p during the boom in technology stocks a year ago.