Psion exits consumer handheld market
By Reuters July 11, 2001, 5:30 a.m. PT
LONDON–Shares in Psion hit a three-year low on Wednesday after Europe’s biggest handheld-computer maker said it would shun the consumer market to focus on corporate and education sales and intellectual property. The news followed a warning overnight from Compaq Computer that cut its sales and earnings forecasts for the second quarter to reflect an industry-wide slowdown, fierce price competition and a weakening European market. Psion is restructuring its struggling digital division, which includes its handheld-computer business, at a cost of around $41 million and the loss of 250 jobs. Psion shares, an underperformer in a sliding sector, fell 11.6 percent in morning trade. However, Chief Executive David Levin said Psion was still on track to make an operating profit in the second half of the current financial year. At the operational level, we will be operating at a profit in (the second half), he said in a telephone interview. Psion said it would restructure its digital division, which accounts for around a third of revenue, to focus on its netBook range of products for education and corporate markets and intellectual property. Psion had a very rich set of intellectual property rights ranging from chipsets to technological know-how in developing handheld devices. He said the company would stop making new consumer handheld computers, although the current products would continue to sell. (We are) not evolving the next generation of product, he said in a telephone interview. Psion has also stopped developing Bluetooth-enabled products for the consumer market, Levin said. He said the market for Bluetooth–a technology that allows devices such as phones and PCs to communicate by radio waves, thus doing away with cables–had not developed. There are very few Bluetooth products on the market, so the market has not evolved, he said. It was anticipated to have come to fruition earlier this year. It seems as though the market may not evolve during this year or indeed into next…There is no point in launching products into a market which has not yet come of age, he said. The $41 million charge includes cover for redundancies that will be primarily from its European sales and marketing operations. Technology analysts on Wednesday welcomed Psion’s decision. Strategically, it is the right thing to do, said one London-based analyst. Psion hasn’t got the financial resources to get to the scale to compete in the consumer market, he said. Psion has gradually lost market share against popular handheld computers that use software from Palm and Microsoft. Teklogix Psion said the continuing North American economic slowdown would hurt second-half revenue at its main division, Psion Teklogix, which makes systems to help companies track their inventory using wireless handheld terminals. The company said European market conditions continued to be a worry. Although Psion Teklogix continues to grow as anticipated in European markets, the risk remains that European markets will experience a similar slowdown to those in North America during the second half, the company said. Teklogic revenues in the first half provisionally grew to $89.2 million compared with $24 million at Psion’s Enterprise business last year. However, while provisional revenue for the group as a whole was up 5 percent at about $140 million in the first half of 2001, revenue at the digital division fell to just under $51 million from $109 million the year before. Shares in Psion have underperformed in the information technology hardware sector by more than 35 percent in the past 12 months. Its low on Wednesday was its lowest ebb since June 1998. Psion had said at the time of its annual results in March and again at its annual shareholders’ meeting last month that trading in Psion Digital had been difficult. Story Copyright 2001 Reuters Limited. All rights reserved.