Mobile computing company Psion 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 and cutting its work force. The company now plans to focus on industrial wireless area network (WAN) and local area network (LAN) products instead of consumer devices.
The company’s move makes way for smart-phone competitors Microsoft and Palm.
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 US$17.6 million. However, Psion, Europe’s biggest maker of handheld computers, said last week it just cannot 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 Wireless Application Protocol (WAP) technology, delays in 2.5- and third-generation (3G) 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 US$16.2 million, the company said, and will provide savings this year of US$25 million and ongoing savings of US$10.3 million. In addition, Psion said it will 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, Compaq Computer, The Hertz Corporation and-the company’s newest customer-automotive giant Volkswagen. Psion said its WAN and LAN offerings were significantly bolstered with the acquisition of Teklogix, which helped increase Psion’s sales 46 percent from 1999. However-as analysts expected-Psion’s profits came in at US$4 million last year, significantly down from 1999’s US$7.2 million. Psion, which released a profit warning in October, recently lost market share to competing personal digital assistant (PDA) 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.”
