Psion splits in two and axes jobs

Psion has reorganised its business into two divisions to reflect its new focus on the higher margin industrial space rather than the competitive consumer sector.

The handheld PC maker is rolling its Psion Computers palmtop device unit, its Connect PC Card modem business, and its InfoMedia digital radio operation into one subsidiary, which will be dubbed Psion Digital Solutions. The aim is to cut costs by merging development and sales teams and to promote cross-fertilisation between them.

The move follows the termination of Psion's joint venture with Motorola to develop the Odin smartphone, and will result in cost savings of £17m this year, mainly from reductions in research and development expenditure.

But it will also lead to 100 redundancies in Psion's London and Milton Keynes offices, mainly from the Computers business, bringing total staff numbers here down to 400. This, the company hopes, will lead to further annual cost cuts of £7m per year, but will lead to a £11m restructuring hit this year.

David Levin, Psion's chief executive, said: "Last year our focus was overwhelmingly on the consumer, but this year there will be more of a balance between consumer and industrial. But the restructuring will mean that, over the next few years, industrial will be our largest business by far. We have no intention to pull out of the consumer market, however."

"In future, we won't produce Odin. At heart, we're a computer company, not a phone company, and we want to play in the digital space, not be a very small phone company. We want to produce products with a high level of value-add that have differentiation. We won't compete on price with the big players, so we'd rather go for features," he continued.

Levin added that this meant Psion would focus on selling industrial systems into the supply chain and logistics space, which he claimed was a £1bn niche market.

As a result, the firm's second division, which comprises its Teklogix acquisition, will become increasingly important within the organisation. Teklogix provides real-time data collection and communication applications to industrial users, but will be expanded to include Psion Enterprise, which sells its offerings into the corporate market.

Levin explained: "In 1999, three quarters of our profits came from our modem business and one quarter from Psion Enterprise. But we made no profits from modems this year, while Computers accounted for half and so did Teklogix. Teklogix will rise in future, however, to be our largest profit contributor by far."