Psion Cuts Jobs and Drops New Product

Mar 01 2001

LONDON - Psion shares tumbled to a two-year low on Thursday as the British company cut jobs and shifted its focus to the industrial world from consumer devices, where it said sales were set to fall.

Europe's largest maker of handheld computers said it was ditching plans to make a "smartphone" after its partner Motorola pulled out in January.

It also said it would merge its Computer division, its modem-making Connect unit and its digital radio division, at a one-off cost of 11 million pounds but with savings of 17 million this year and seven million in years to come.

Chief Executive David Levin told a telephone news conference 100 jobs would go -- a fifth of the workforce in this new unit to be called Psion Digital Solutions.

"It is expected that sales this year will decline in Psion Computers and Psion Connect. The downsizing of these businesses and their focus on new markets will be challenging," Chairman David Potter said in a statement. Psion also said delays in the roll-out of high-speed mobile phone networks would hit Symbian , the wireless software consortium it set up with handset makers Ericsson, Motorola and Nokia .

It made the announcements as it reported a year pre-tax loss of 1.4 million pounds for 2000, compared to a 4.6 million pound profit the year before.

The shares dropped some 17 percent by 1110 GMT to 128 pence, the lowest since January 1999.

The smartphone project was to have used the EPOC operating system that Psion developed but is now owned by Symbian. Psion said profits had been hit by heavy investment in Symbian but it said this would continue, with an additional round of equity financing worth 20 million pounds to be completed this month.

TEKLOGIX "Although the shares are likely to fall because of the further delays at Symbian, we believe Psion's reorganization is a positive move," independent analysts Equityinvestigator.com said, rating Psion a short-term sell and long-term buy.

"At these levels the company is valued, we believe, less than the value of Teklogix plus...the Symbian stake." The grim news in the consumer business was offset by better news in Teklogix, which makes systems to help companies track their inventory wirelessly using handheld terminals.

It has installed a new wireless local area network system for German automotive giant Volkswagen AG .

Potter said the outlook for Teklogix, acquired last year, was for good growth and profitability in 2001.

Teklogix will account for 45 percent of revenues this year but a higher share of profits and will be Psion's main focus. "We have taken time to rethink the future strategic direction of the business," Potter said.

"The result is a simplified group structure, with reduced costs and a focus on Psion Teklogix as our key operating division. This will be our largest business in the coming year."

Levin insisted Psion was committed to consumer goods and a new portable computer with Bluetooth -- a radio technology that allows wireless devices to speak to each other -- would be out in the second half of this year.

MARKETS Some researchers say Psion, with its clamshell keyboard devices, is losing European market share to the pen-using designs of U.S. palmtop computer maker Palm .

Levin declined to say if Psion's next products would stick with its traditional design.

Psion said turnover for 2000 was 220 million pounds, up from 150 million the year before.

It set a total dividend for the year of 0.62 pence a share and said it had 40 million pounds in cash at year end. Psion has had a torrid time, even by tech stock standards. An October profit warning was followed by another black day when Motorola's pull-out wiped a fifth off the shares' value. They have sunk ever since. Once at 15 pounds, they have underperformed their sector by some 70 percent in the last year.