Psion has faith in the future

Company downplays cuts in consumer handhelds, saying it is leaving its options open for PDAs and Bluetooth
Written by Graeme Wearden, Contributor

Wednesday was a fairly bleak day for Psion. As well as losing 250 employees, and taking the resulting £29m charge on the chin, it had to contend with headlines claiming that the UK manufacturer was "abandoning" the consumer PDA market.

Psion insists that such claims are not true, despite the fact that it has suspended production of its Bluetooth PDA and, faced with a "weak and oversupplied" handheld market, will not be developing new consumer handhelds. The company says it is simply evolving its business model so as to stay profitable.

Psion emphasises that it is planning to continue selling and supporting its existing PDAs, which include the Revo range, the series 7 and the series 5mx. The Revo Plus, with its built-in WAP browser, was launched only last summer.

And the company is keeping its options open. "There will be more Psion consumer products in the future," said Peter Bancroft, a senior Psion spokesman.

He said that the most likely candidate for a new consumer gadget is Psion's Bluetooth PDA, which was at an advanced stage of development. But with Bluetooth only slowly emerging into the mainstream market, the company decided now was not the time to launch. "There's no point launching a Bluetooth PDA when there are very few other Bluetooth-enabled products available," said Bancroft. "If the Bluetooth market develops then we'll probably either launch the device in partnership with another company, or sell the intellectual property," he predicted.

Bluetooth is a radio-based technology for allowing consumer electronics communicate with each other and with PCs.

Another factor behind the strategy shift was wireless convergence, which has intensified competition.

The third-generation (3G) mobile networks that will launch in the next few years will mean much faster data rates than are available today, meaning that a mobile phone will be able to offer the sort of functionality previously seen on a handheld computer. This potential has drawn consumer electronics and mobile phone giants into the market. For example, Sony is teaming up with Ericsson, and Microsoft developing its Stinger platform and pushing Windows CE 3.0.

Psion has decided that it simply can't compete with such industry giants. "Do you really want to be in a market where Sony and Nokia are your main competitors?" said Bancroft.

The company had intended to make a foray into the wireless handheld market with a much-anticipated product, Odin, in co-development with Motorola. But Motorola pulled out of the project amid restructuring, and Psion later decided that Odin was not worth finishing on its own.

Of course, Psion still has a share in Symbian, the joint venture to use Psion's EPOC operating system in wireless devices, but the death of Odin means that Psion will not itself be making Symbian devices.

Ultimately, shrinking profit margins mean that it is not worth braving the increasingly cutthroat competition in the PDA market, the company says. "We've recognised that the convergence of the handheld computer and the mobile phone will result in a PC-type market, where the products are very similar and the margins are very tight," Bancroft said.

Instead, the company will concentrate on an area that offers better profits: its Teklogix division, which makes customised handheld devices for enterprise customers.

Psion has been supplying such products to companies since the 1980s -- when high street retailer Marks and Spencer used Psion devices for its logistics work -- and believes this is the best place to concentrate its efforts in the future. "The enterprise markets of Psion Teklogix offer sound long-term growth opportunities," said David Potter, chairman of Psion.

Analysts say that Psion's handhelds have been a victim of a change in the structure of the PDA market, which has seen keyboard-based PDAs -- in which Psion is the clear market leader in Western Europe -- squeezed out by pen-based PDAs. These were first popularised by Palm Computer and are more popular than keyboard-based PDAs and sub-notebooks.

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