Psion pulls out of handheld market

Psion: Moving away from handheld computers

The UK's once-brightest hope for global tech dominance, Psion, has thrown in the towel in the battle to dominate the handheld computer market.

The firm, battered by the global slowdown and rivals such as Palm, Compaq and Microsoft, is to abandon development or production of new personal digital assistants (PDAs).

Bluetooth is late on the uptake and much smaller than anticipated

David Levin
chief executive

Instead it will focus on providing digital networks for businesses.

As a result of the changes, 250 jobs will go.

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

Chief executive David Levin said the market for Bluetooth products had not evolved.

"Bluetooth is late on the uptake and much smaller than anticipated," he added.

Handheld support

Mr Levin said that, although the company would stop making new consumer handheld computers, the current products would continue to be sold.

"There is no question of leaving users high and dry," Peter Bancroft, company spokesman, told BBC News Online.

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

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

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

Oversupply

Psion has blamed its change of strategy on the US slowdown and an oversupply of the market with competition from rivals such as Palm and Compaq.

Following news of the restructuring, Psion's shares fell almost 20% to 55.25p at 0706 GMT.

Later in the day, they recovered to 70p, down 1p, at 1442 GMT.

During early morning trading, the stock, which has fallen about 95% from its peak value of March 2000, hit a three-year low.

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

He noted that the shares had come back following the company's briefing of analysts.

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 would continue to sell.

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

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

Symbian

Psion also said that it would concentrate on its investment in the Symbian mobile phone software operations.

Symbian is an operating system that will allow new-generation mobile phones, PCs and handheld devices to communicate with each other.

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

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

Provisional revenues

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

In addition, Psion reported that provisional revenues for the enlarged Psion Group in the first half of 2001 were up 5% at £99m.

This compares with £94m in the first half of 2000.

However, first half revenue for the digital unit, which makes modems as well as computers, fell 53% to £36m from £77m in the same period last year.

Despite its continuing poor performance, Mr Levin said the company is still on track to make an operating profit in the second half of the current financial year.

March results

When the company unveiled its full year results in March, revealing losses of £1.4m, its shares dived 20%.

Ironically, back in March Mr Levin also confirmed the company's commitment 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.

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

Mr Bancroft added that Psion would 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.

He added that 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 added.

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