Mobile computing company Psion plc shook the European wireless market-and sent its stocks rocketing to a new 27-month low-with news that it is dropping out of the running in the smart-phone industry, cutting its workforce and now plans to focus on industrial WAN and LAN products instead of consumer devices.
The company’s move makes way for smart-phone competitors Microsoft Corp. and Palm Inc.
Psion’s announcement last week came after Motorola pulled out of its smart-phone deal with the company in January as part of Motorola’s efforts to streamline operations. The jointly developed product was scheduled to hit the shelves this summer. Psion originally said it would continue with the smart-phone project, called Odin, at an additional cost of about $17.6 million. However, Psion, Europe’s biggest maker of handheld computers, said last week it just can’t compete in the smart-phone space.
“The board has decided that the group cannot address the large and crowded market for integrated wireless computers alone and will need to be realigned,” Psion said in a statement.
According to Psion’s release, the slow uptake of WAP technology, delays in 2.5- and third-generation technology and the costs of spectrum licenses are dragging down the supplier industries, and the company can no longer stay afloat.
“Psion is a computer company, not a phone company,” said David Potter, chairman of Psion, during a conference call. “The scale of the project is too large in relationship to size … and will take us down paths that we do not want to go down.”
Psion’s withdrawal spurred a variety of cost-cutting measures. The company said it will combine its Psion Computers, Connect and InfoMedia divisions into one unit, Psion Digital Solutions. The restructuring will cost $16.2 million, the company said, and would provide savings this year of $25 million and ongoing savings of $10.3 million. In addition, Psion said it would have to cut its work force in the new unit by 20 percent.
“We need to get back into a position of high profitability,” Potter said.
With its exit from the smart-phone market, Psion said it would focus more heavily on its wireless local and wide area networking products for the business market. With more than 10,000 systems already installed, the company’s customers in this area include Dell Computer Corp., Compaq Computer Corp., The Hertz Corp. and-the company’s newest customer-automotive giant Volkswagen AG. Psion said its WAN and LAN offerings were significantly bolstered with the acquisition of Teklogix Inc., which helped increase Psion’s sales 46 percent from 1999. However-as analysts expected-Psion’s profits came in at $4 million last year, significantly down from 1999’s $7.2 million. Psion, which released a profit warning in October, recently lost market share to competing personal digital assistant giant Palm, according to research and consulting firm Canalys.com. Psion said its flagging profits were due to its substantial investments in Symbian, Psion Computers and its new ventures.
For the coming year, Psion said it expects to rely heavily on its Teklogix division and that its consumer operations are likely to continue to fail.
“Our revenues in 2001 will be lower than originally planned,” Potter said.
“Psion has been declining for many, many years,” said industry analyst Ken Dulaney, vice president of mobile computing for Gartner Inc. “Palm, Handspring and the other PDA vendors are taking the market.”
Dulaney said Psion’s announcement was the smartest move the company could make. He said the company’s Teklogix division was its real money maker, and that focusing more heavily in the industrial WAN and LAN market would likely help Psion regain its footing.
“If they don’t screw up, they can do well,” he said.
Even with Psion’s withdrawal from the smart-phone market, the company said it would continue its heavy investment in Symbian, of which it is the majority shareholder. Symbian is an alliance among Motorola, Psion, L.M. Ericsson and Nokia Corp., which works to push Symbian’s Epoc operating system. Psion’s planned Odin smart phone was based on the operating platform. Symbian recently raised $29.4 million in an additional round of equity financing, and plans to deliver 20 licensee products over the next two years, Psion said. Symbian’s platform upgrades are continuing to roll out, according to the company.
However, Dulaney said Symbian still has a tough fight ahead of it.
“Symbian’s done a terrible job of marketing the platform,” he said.
While other companies like Microsoft and Palm have been aggressive in their marketing strategies, Symbian has lagged behind in the area, Dulaney said. And platform marketing is as important-if not more important-than platform technology.
But Symbian is still in the game, Dulaney said. Nokia is the company’s bellwether, and its use of Symbian’s Quartz and Pearl platforms in its phones should drive up interest in Symbian.
