The market for personal digital assistants, once thought to be a gold mine for anyone and everyone looking to make a profit, is now swimming in such bitter competition and crowding that one of the industry’s leaders is bowing out-Psion plc, Europe’s largest PDA company.
The company said it will cut 250 jobs and take a $40 million restructuring charge, which accounts for write-offs and inventory expenses, as part of the retreat.
Psion’s move comes as no real surprise. The company has been slowly withdrawing from the PDA market since the beginning of this year, and has been suffering along with other major PDA players, including Palm Inc. and Handspring Inc.
Psion said it could no longer compete in the European PDA market because it is becoming oversupplied and the “commoditization of these markets is expected next year,” the company said in a statement. PDA newcomers like Sony, FutureCom Global, Fujitsu, Sharp, MediaSolv, Casio, Royal Business, Acer and a variety of others have released a glut of new handhelds. Psion’s PDA division lost more than $50 million in the first quarter compared with the same period last year.
The company is also withdrawing on plans for its much-hyped Bluetooth PDA and range of Bluetooth connectivity products, which were scheduled for release in the second half of this year. Psion said the market for Bluetooth products is “slower than anticipated”-a potential warning for companies hopeful to cash in on Bluetooth, a short-range technology for wirelessly transmitting data.
Psion said it plans to refocus its business on its wide area and local area networking industrial products, which has been the company’s main moneymaker since it acquired Teklogix Inc. in September. Psion has more than 10,000 WAN and LAN systems already installed, and its customers in this area include such big names as Dell Computer Corp., Compaq Computer Corp., The Hertz Corp. and Volkswagen AG. Revenues in Psion’s Teklogix division were up to $88 million in the first half this year, from $23 million in 2000.
“The IT industry is experiencing its worst downturn since 1985,” said David Potter, the company’s chairman. “Against this background, it is essential that we take the hardest approach to costs, control and a return to profitability while avoiding exposure to oversupplied commodity markets. The enterprise markets of Psion Teklogix offer sound long-term growth opportunities.”
In the first half of this year Psion reported $139 million in revenues, up 5 percent from last year’s $131 million. The company said it continued to show revenue gains until June, when the North American economic slowdown hit the European market. Psion said the slowdown could continue to affect the company through the rest of the year.
Psion’s announcement last week comes after a series of retreats from the wireless device industry. In February, Motorola Inc. pulled out of a deal to jointly develop a smart phone with Psion. At the time, Psion said it would continue with the phone, called Odin, and shoulder about $18 million in costs. Then, one month later, Psion said it was bowing out of the smart-phone space entirely, citing the slow uptake of WAP technology, delays in 2.5- and third-generation networks and the costs of spectrum licenses as reasons behind the move. Psion also took a restructuring charge of $16.2 million and cut 20 percent of its work force in its newly created Digital Solutions division.
Finally, two months ago, Psion closed down its joint wireless Internet venture with United Business Media, Trivanti Ltd., due to the slow growth of the mobile data market. The company said the closure resulted in 16 layoffs and a $1.44 million write-off.
