Psion Plc Business Information, Profile, and History

Company Perspectives:

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History of Psion Plc

Britain's Psion PLC is reinventing itself. The pioneer in hand-held computers has announced that it will discontinue its production of mobile computer products for the consumer market in 2001 and instead reorient itself as a manufacturer of wireless and mobile devices for industrial applications under main subsidiary Psion Teklogix. This subsidiary has been built on the company's existing commercial and industrial products activities and its September 2000 acquisition of Canada's Teklogix. The acquisition of Teklogix has enabled the company to maintain its revenues, which topped £219 million in 2000, despite its decision to exit the personal digital assistant (PDA) market. Nonetheless, the company continues to sell and support its existing consumer products--including the Series 5 and 7 hand-helds, the internet-connectable Revo and the Wavefinder Digital Audio Broadcast receiver, as well as PC Card modems and connectivity components--through its newly created division Psion Digital, which consolidates the company's former Psion Computers, Psion Connect, and Psion Infomedia divisions. Part of the company's decision to restructure comes from its disappointment after Motorola pulled out of the companies' partnership to develop next-generation digital "smartphones." Psion also owns 28 percent of the Symbian Ltd. joint venture with Nokia, Motorola, Ericcson, and Panasonic. This company is redeveloping Psion's EPOC operating system for the mobile telecommunications market. Psion is led by founder and Chairman David Potter and CEO David Levin and is traded on the London Stock Exchange and on the U.S. OTC market.

PDA Pioneer in the 1980s

David Potter grew up in East London, South Africa. Potter's father died when he was still a baby, and Potter was raised by his mother, a nurse, and his grandmother. Potter was an excellent student, winning a scholarship to study at Cambridge University in England in 1963. Potter, who worked a series of odd jobs to support himself as a student, went on to earn a Ph.D. in mathematical physics and then went to work as a lecturer for the University of London and California.

The stock market crash in the early 1970s led Potter to recognize that a number of stocks were undervalued. Taking his £3,000 in savings, Potter invested in such large companies as Racal Electronics, General Electric, and Xerox. Smitten by the investment bug and forecasting a coming high-technology boom, Potter began seeking out investments in smaller companies. "I figured I was good at research, smaller companies were not well researched, and I could find opportunities to invest," Potter told the Daily Telegraph. "Then, when the chip came along, bingo."

Potter's investment in the nascent semiconductor industry had made him wealthy. His interest in computers prompted him to go into business for himself. "I would never have been comfortable being an academic all my life. The growth of the semiconductor industry was clearly going to have a huge impact on the world. And I've always felt you've got to take your opportunities in life," Potter told the Daily Telegraph.

In 1980, Potter used £70,000 of his own to set up Potter Scientific Instruments--which could be abbreviated as the Greek letter "Psi." Possible trademark conflicts with another company caused Potter to add a suffix--"on"--because of its high-tech sound and its similarity to the giant Exxon. "That's an enormous entity, but you have to have ambition," Potter told the European. The company quickly became known simply as Psion (which, to its fans, was short for Potter Scientific Instruments--Or Nothing).

Joined by a number of Potter's students, Psion first concentrated on developing games and other software products for the Sinclair computer, one of the earliest personal computer designs. The company also opened a subsidiary in South Africa in 1981. Psion hit pay dirt in 1982 when it released a flight simulator program, selling more than a million copies. The company became one of the leading software developers in Europe, with sales of £1.6 million by the end of that year.

For Potter, software was only a means to a more lofty ambition, that of creating a computer hardware company. Sales of the company's flight simulator program gave it the finances to begin development of its own hardware products. "In the autumn of 1982 I found myself sitting in a Greek restaurant with one of my colleagues, Charles Davies, who had been my brightest doctoral student. We began to sketch out on napkins a hole in the market and a hardware product to fill it." That first product, released in 1984, was called the Organiser.

The Organiser represented somewhat of a revolution, becoming the world's first hand-held computer. The product featured a database and clock, one kilobyte of memory, and a one-line LED screen, along with an alphabetic keyboard and plastic cover. Although originally designed for the consumer market, the Organiser found a strong market among corporate and commercial users--such as Marks & Spencer, which used the device for their inventory system.

Psion released the next generation of the Organiser in 1986. The Organiser II featured as much as 64k of memory and quickly developed a reputation for being rugged; some models were still in use nearly 15 years later. The company had tapped into the consumer retail market--the Organiser II became considered a necessity among business users--and its sales swelled past £10 million. The following year, stock market buff Potter brought his own company to the market, listing the company on the London stock exchange.

"Filofax of the 1990s"

Potter and Psion recognized the potential for combining its hand-held technology with the new market for data transmission. In 1989, the company acquired Dacom, a maker of PC card-based modems and other portable devices. That same year, Psion attempted to adapt its technology to a new and promising market, that of the portable computer. The company released the first of its MC (Mobile Computers) series, the MC 200, which featured a 16-bit operating system, a touchpad, and a 640x200 LCD screen. The company produced four different MCs, culminating with the MC Word model, featuring a built-in word processor. But the company was unable to compete against the rise of the PC-compatible computer and quickly ended its notebook computer production.

Meanwhile, the company's Organiser sales were being hammered by a wave of new competitors, as giant companies such as Sharp and Canon began to dominate the organizer market. Industry observers were wondering how long Psion would be able to last in the increasingly competitive technology market. The company was struggling, and by 1991 had slipped into losses.

Psion responded in 1991 with its Series 3 hand-held computers--which were becoming known as palmtops--and set a new industry standard. The first organizer to feature a "clamshell" design, the Series 3 offered up to 256k of memory, with a 16-bit, multitasking graphical interface driven by its own keyboard. More important, the device offered fully functional software programs, such as database, spreadsheet, and word processing capability. The Series 3 became the first hand-held to offer similar capabilities to the personal computer and proved the company's next great success, selling more than 1.5 million units by the middle of the decade.

At the same time, Psion launched its HC series, based on the Organiser, designed for corporate use. The HC featured a particularly rugged design, which in turn inspired the company to bring out the Workabout, a rubber-enclosed version of the Organiser designed specifically for an industrial environment, first released in 1993.

Psion prepared a new generation of the Series 3, and in 1993 the company launched the Series 3a to popular acclaim. The new generation, which later offered up to two megabytes of memory, quickly captured the leading share of the palmtop market. Psion's hand-held soon became known as the "Filo-fax of the 1990s."

Meanwhile, Psion was attempting to enter the U.S. market. By 1994, however, the company's sales had topped £100 million but remained almost entirely limited to Europe, and especially to its core U.K. market. Despite holding what many considered to be superior technology, Psion lacked the marketing muscle to compete in the United States, particularly against the growing number of PDAs and their handwriting recognition technology. Yet in the United Kingdom at least, the Series 3 remained Psion's true star in the first half of the 1990s, driving its sales up to £124 million by 1996. By then the company had opened subsidiaries in The Netherlands and Germany, with distribution of its products to more than 45 countries.

In 1996, Psion reorganized its operations to cope with its fast growth. The company now created four divisions, operating as subsidiaries: Psion Computers, which took over its hand-held business for the consumer and corporate markets; Psion Industrial, later named Psion Enterprise, which focused on portable data collection systems for the industrial market; Psion Dacom, dedicated to developing modems and other communications and connectivity devices; and Psion Software, which took over the company's software development operations.

That same year the company released the Series 3c, offering features such as infrared ports and back-lighted screens. The company also attempted to enter a growing mid-range category of devices with the Siena, a smaller and lighter version of the Series 3 devices. The Siena was plagued by fragility problems, however, and was quickly abandoned by the company.

A more successful launch came in 1997 when the company released its acclaimed Series 5 (there was no Series 4--the number was considered bad luck in some Asian countries). The new hand-held, which received high marks for its hardware features and especially its keyboard, also featured the new EPOC operating system, a powerful 32-bit multitasking platform designed not just for the company's hand-held, but also to power the coming integration of computing and mobile communications technologies. Yet the company was hampered by its limited production capacity and found itself unable to meet the demand for its products.

New Direction for a New Century

Psion attempted to license EPOC to other hardware companies; yet the U.K. company now found itself under attack from two U.S. companies. On the one side was U.S. Robotics (later 3Com), which was rapidly taking over the U.S. and then world market with the Palm Pilot. On the other side was none other than Microsoft Corporation, which had released its Windows CE operating system--and, in an internal memo, had labeled Psion as its "number one global threat." Yet the new generation of PDAs, which, while more limited in their functionality, were smaller and lighter than Psion's products and also less expensive, soon all but locked Psion out of the U.S. market. By the end of the decade, the new generation, led by the innovative Palm, had begun to make serious inroads in Psion's home territory as well.

As a defensive move, Psion spun off its software division, including the EPOC operating system, into a joint venture with Nokia, Motorola, and Ericsson (joined by Matsushita Panasonic the following year) in 1998. The new venture, called Symbian Ltd., set out to adapt EPOC as the operating system driving the coming new generation of so-called "smartphones," set to give mobile telephones entirely new functions. Psion's share of the joint venture was set at 28 percent; Symbian itself, which was planning a public offering, was soon given an estimated market value of as much as £7 billion.

Meanwhile, the company's hand-held sales continued to be battered by the competition. Despite the launch of two new products in 1999, the Series 7 hand-held and the hand-held internet-connectable Revo, the company sales were slipping. By the end of that year, Psion had posted sales of slightly more than £150 million, down nearly £10 million over the year before.

Psion, led since 1998 by CEO David Levin, began to prepare itself for a new future. In 2000, the company paid nearly $370 million to acquire Teklogix International of Canada, which developed products and software based on its own wireless technology. The acquisition, which boosted the company's sales to nearly £220 million in 2000, also created the company's largest division, dubbed Psion Teklogix.

Psion Teklogix enabled the company to make an about-face the following year. The company had been banking on its joint development agreement with Motorola to create a new wireless hand-held device. When, as the result of the shrinking economy, Motorola pulled the plug on the project in 2001, Psion was forced to abandon its plans to enter the smartphone area.

In July 2001, Psion announced that it was restructuring its operations again, now into two divisions: Psion Teklogix, which was to become the company's main operational focus; and Psion Digital, which inherited its consumer hand-held as well as its Psion Connect modem and communications products. At the same time the company announced that it was abandoning new development in the hand-held and PDA market; by then, the company's share of the European market had slipped to less than 9 percent. Yet, despite being overtaken in a market that the company itself had created, Psion had successfully reinvented itself as a provider to another booming market, that of wireless mobile and enterprise IT systems.

Principal Subsidiaries: Psion Computers PLC; Psion Connect Ltd; Psion InfoMedia Ltd; Psion Nederlands BV (Netherlands); Psion GmbH (Germany); Psion Inc. (U.S.A.); Psion France SAS (France); Psion Services Ltd; Psion Property Ltd (France); Psion Teklogix Inc. (Canada); Psion Teklogix Corporation (U.S.A.); Psion Teklogix de Mexico SA; Psion Teklogix do Brasil Ltda; Psion Teklogix de Argentina SA; Psion Teklogix Ltd; Psion Teklogix (U.K.) Ltd; Psion Teklogix GmbH (Germany); Psion Teklogix SA (France); Psion Teklogix BV (Netherlands); Teklogix AB (Sweden); Psion Teklogix Italia Srl; Psion Teklogix Espana SL; Psion Teklogix Systems India Pvt Ltd (India); Psion Teklogix Africa (Pty) Ltd (South Africa); Symbian Ltd. (28%).

Principal Divisions: Psion Teklogix; Psion Digital.

Principal Competitors: @pos.com; Handspring Inc.; Hewlett-Packard Corporation; Kontron Mobile Computing AG; LG Group; Minorplanet Systems Plc; National Datacomputer Inc.; NCR Corporation; Palm Inc.; Philips Electronics NV; Research In Motion Limited; Wyse Technology Inc.

Chronology

• Key Dates:
• 1980: David Potter founds Psion as developer of computer software.
• 1982: Flight Simulator, which sells over one million copies, is released.
• 1984: Organiser, first hand-held computer, is launched.
• 1986: Organiser II is launched and becomes best-seller.
• 1988: Psion goes public on the London stock exchange.
• 1989: The company acquires Dacom modem products manufacturer; attempts to enter notebook computer market with MC series.
• 1991: The company introduces the highly successful Series 3 hand-held computer.
• 1993: Series 3a is released and Psion becomes the leading maker of hand-held computers.
• 1996: Psion restructures into four divisions: Computers, Industrial, Dacom, and Software.
• 1997: Series 5 is released, to critical acclaim.
• 1998: The company spins off Psion Software into Symbian joint venture.
• 1999: The company debuts the Series 7 hand-held and the Revo personal digital assistant (PDA).
• 2000: The company acquires Teklogix International (Canada), which is renamed as Psion Teklogix and becomes the company's largest division.
• 2001: The company restructures operations into Psion Teklogix and Psion Digital divisions; announces major decision to discontinue development of hand-held computers for the consumer market.