Modem cards will cost Psion

Psion's share price fell a further 25 pence as trading started Thursday, down to 807.50p. The shares experienced an almost immediate 85p drop yesterday when it first issued the profit warning.

Psion claimed its PC card division, Psion Dacom would be affected this year by the growing trend of notebook manufacturers embedding PC Card modems. Psion had a successful 1998, winning major OEM deals with IBM and Dell Computer Corp., among others. Psion said it expected the shift, but not as rapidly as it has happened.

"We've been planning on the modem market going embedded for a couple of years now," said Psion spokesman Peter Bancroft. "It's just a question of timing. The shift has been quicker than anticipated and that will severely affect revenues for Psion Dacom and for Psion as a whole."

Ripple effect
The profit warning has sent ripples through the PC card industry and Bancroft believes this will not be the only announcement of its kind. "I would imagine a number of other PC card makers will be affected," he said. "However, I am not sure whether they will all have to reveal themselves in the same way that we have been obliged to."

Bancroft said companies like 3Com could virtually "hide" any slip in PC Card revenues, whereas Psion's commitment to the London Stock Exchange has meant it could not keep its cards close to its chest.

State of denial
PC card rival TDK has, however, dismissed claims that it will be severely affected by the industry move to embedded modems. "We've worked hard to ensure a balance between distributed and OEM sales," said Keith Marsden, managing director of TDK Systems Europe. "We've been concentrating on GSM, ISDN and LAN cards and not on the analogue modem business."

Bancroft added that the Dacom division is also working heavily on its multifunction GSM and LAN card business but won't see the benefits from this until 2000.

Psion will announce its results on March 3.