Psion has reported a small operating profit for the first half of 2002 despite falling revenues and difficult conditions in its core Teklogix business.

Revenues for the first six months of the year fell 29.6% to GBP 70.8m. Profit at the operating level, before goodwill and exceptional items was GBP 2.2m, up from a GBP 6.4m loss in the same period last year. The net loss, including goodwill charges dating back to Psion’s acquisition of Dacom and investments in the Symbian wireless operating system venture, was GBP 15.4m, down significantly on the GBP 54.4m loss reported last year. Psion continued to wind down the operations of its Digital division, which was once the market leader in handheld computers, while its Teklogix industrial wireless computing business experienced difficult trading in key North American markets. However, Psion said it was confident that Teklogix would show a profit for 2002.

The business was cash generative during the first half of 2002 and Psion said it was confident that its current cash reservces of GBP 26.0m would enable it to fund its commitments to Symbian until the venture reached break even. David Potter, Chairman and founder of Psion, also said that the first mass market product using the Symbian OS, Nokia’s 7650, had received a ‘positive’ market response. Nokia has previously said that it hopes to sell 1m 7650 devices per month from Q4 2002.

Potter stated: “Management expects that enterprise markets in information logistics will continue to be difficult during the second half of the year. While we are not at this point seeing any improvement in market conditions, Psion Teklogix, for the full year, is expected to be profitable and cash generative, with revenues expected to be flat or marginally ahead of the prior year. Symbian has made good progress in the first half, but it will continue to carry heavy costs as it brings its program forward. It expects to see increasing revenues during the second half of the year. However, the markets that Symbian is addressing are nascent ones and the scale of revenue required to generate profits is not likely to be seen until annual volumes of between fifteen and twenty million units are reached.”

Insight

After the upheaval caused by its exit from the consumer handheld and data communications businesses, Psion appears to have established a stable platform to move forward. That its core Teklogix industrial wireless computing operation can remain profitable in today’s harsh spending climate bodes well for future recovery. However, Psion’s real potential lies in the success of Symbian, its joint venture with Ericsson, Matsushita, Motorola, Nokia and Siemens.

Reading into David Potter’s comments on the progress of the venture, it appears that it will continue to require additional funding for some time, perhaps 18 months. Psion has already contributed to an additional round this year, but Potter also alluded to a change in policy whereby certain partners in the venture would now fund the developments most important to them. He said: “Following early positive indicators for these new smartphone products [SonyEricsson P800 and Nokia 7650], Symbian has increased its resources in bringing forward the delivery of key related software releases, for some of which additional costs are being funded by licencees directly.” Psion, which only uses an older version of the Symbian OS in some of its products, could benefit from this new policy through lower future funding commitments.

Another item of interest is Psion’s investment in unspecified ‘small software activities related to the future programmable cellphone market’. Although it would be virtually impossible for Psion to re-enter the consumer handheld or smartphone business, it is worth remembering that Psion was once the market leader and for good reason – it produced some truly excellent products. It is refreshing to know that there is still some innovation going on behind closed doors which may, at some point, give birth to another Symbian or Psion Series 3.