Psion slump signals sea change for PC cards

Psion shares continued to fall this morning following yesterday's revelation that the company's profits for 1999 would be hit due to poor modem sales, following the rapid switch to embedded modems in notebooks.Psion's share price fell a further 25p as trading started this morning, down to 807.

Psion shares continued to fall this morning following yesterday's revelation that the company's profits for 1999 would be hit due to poor modem sales, following the rapid switch to embedded modems in notebooks.

Psion's share price fell a further 25p as trading started this morning, 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 -- which had a succesful 1998 winning a number of major OEM deals most notably with IBM and Dell -- would be affected this year by the growing trend by notebook manufacturers to embed PC card modems. This is a trend the company was prepared for but it admits that it has been caught out by the pace of change.

"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."

The profit warning has sent ripples through the PC card industry and Bancroft believes this is not the first 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 added that 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.

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.