Nokia grabs Psion's Symbian stake

Psion's decision to sell its chunk of Symbian could damage the operating system's chances of dominating the smartphone market. Now analysts believe Symbian looks like it's just Nokia's baby

UK handheld computer manufacturer Psion has agreed to sell its stake in Symbian, the wireless operating system maker, to Nokia.

The agreement, announced on Monday morning, will give the Finnish mobile phone maker effective control of Symbian. It also means that Psion will concentrate on making specialised mobile technology products for companies through its Teklogix arm, rather than continuing to play a part in the consumer electronics market.

Nokia is expected to pay around £135m for Psion's 31.1 percent stake in Symbian -- £93.5m upfront followed by further payments depending on sales of Symbian devices in 2004 and 2005. This values Symbian as a whole at £436m.

Psion says that the deal represents good value for its shareholders, as floating Symbian on the stock market with an initial public offering (IPO) isn't seen as sensible at present.

"The business of Symbian is now maturing and an IPO remains feasible, but changes in the wireless industry mean that the practicality and timing of the IPO is subject to significant uncertainty," explained David Potter, chairman of Psion, in a statement on Monday.

"As a result, the board of Psion believes it is in the interests of Psion shareholders to sell its interest in Symbian to Nokia on the terms that have been negotiated," Potter added.

However, Psion's shares plunged in value in early trading in London.

The sale is still subject to regulatory approval, and also the approval of Psion's shareholders. Potter, who owns some 12 percent of Psion, is committed to voting in favour of the deal.

Symbian was created in June 1998 as a partnership between Psion, Nokia and Ericsson, with Motorola becoming a shareholder a few months later. Symbian was meant to drive the smartphone market through the creation of operating systems based on Psion's EPOC software that could be used by any mobile phone maker.

However, Motorola sold its stake to Nokia and Psion in 1999 in a move seen by analysts as evidence that other operating systems -- perhaps made by Microsoft or based on Linux -- could instead dominate the smartphone operating system market.

According to Dean Bubley, analyst at Disruptive Analysis, the sale of Psion's stake to Nokia is confirmation that Symbian is largely synonymous with Nokia, rather than being the cross-industry platform it was once meant to become.

"This morning's announcement indicates that most other Symbian licensees are using the operating system just for niche products, rather than core and strategic parts of their product line," said Bubley.

Bubley added that this was this is particularly true of other licencees of Series 60, which is Nokia's implementation of Symbian for mobile phones that only use their numerical keypad, rather than a stylus, for imputting.

Bubley also believes that the sale may reflect market uncertainty about the mass-market potential of smartphones, given the levels of functionality that operators want to offer.

"Disruptive Analysis believes that a major issue emerging this year will concern mobile operators' escalating customer support costs related to handsets with overly complex software," he explained.

Over two million Symbian-based smartphones were sold in the last quarter of 2003, according to recent figures that showed it was becoming an increasingly powerful competitor. But some observers believe that Symbian's future may be clouded now that it is clearly under the control of a single mobile phone company.

"Symbian has been assiduously courting the operator community, promoting itself as willing to compromise in order to help them achieve their goals. With Nokia in the driving seat, this pitch loses its credibility," warned Jessica Figueras, practice leader of TelecomsIT at analyst firm Ovum.

"Operators may conclude that they were right to be suspicious of Nokia's motives, and should press on with the alternatives. Nokia might have reflected that, at a time when it is still wholly dependent on shipping handsets, this is no time to alienate those who might help it diversify, namely mobile operators and the other Symbian licensees," Figueras added.

For Psion, though, the future will revolve around creating mobile technology products for individual companies -- such as handheld devices for use in warehouses, at airports and for automotive firms.

"Psion now intends to support Psion Teklogix's organic growth with prudent acquisitions and investments," said Alistair Crawford, chief executive of Psion.

"These acquisitions will either add to the existing activities and be justified by the subsequent cost savings and efficiencies that will be available, or they will accelerate the expansion of the business into adjacent markets and technologies," Crawford explained.