Psion Gets a Hand from Palm IPO
By Cindy Christ

Palm Computing wasn't the only hot stock Thursday in the booming handheld computing market.

In London, shares of Psion Plc (LSE:PON.L), a leading developer of electronic organizers for the European market, shot up 12.3 percent to 72.7 pounds in sync with Palm Computing's IPO (PALM), which soared 150 percent in its debut on Wall Street.

To be sure, enthusiasm for the Palm IPO has fueled recent gains in Psion's share price. But the real engine driving the UK-based firm's 11-fold rise over the last year is its majority stake in the Symbian consortium.

Backed by Finland's Nokia (NOK), Ericsson of Sweden (ERICY), Motorola in the U.S. and Japan's Matsushita Communication Industrial Co., Symbian is working to develop a standard operating system on which next-generation smartphones and Internet access devices will run.

Marketed under the name EPOC, the Symbian operating system hopes to become the Windows of wireless communications, an ambition shared by rival Palm Computing which also aims to put its Palm operating system under the hood of every handheld device.

Though it's not much of a threat, Microsoft (MSFT) also is in the running with its stripped-down version of Windows called Windows CE that runs on palm-top computers.

While the battle is far from won, most analysts think Symbian is leading the charge. With all of the world's top mobile phone makers backing the venture and alliances with IBM (IBM) and Qualcomm (QCOM), whose CDMA wireless technology is expected to be the standard for next-generation cell phones, Symbian gets the confidence vote.

On Wednesday, Psion reported results for 1999. Despite posting an 80 percent drop in earnings due to spending on wireless data and Internet products, shares held onto recent gains.

For the year, earnings plummeted to 4.6 million pounds, compared to 23.3 million in 1998. The company said mounting costs at Symbian caused most of the decline.

On the upside, the launch of the latest version of Psion's Revo electronic organizer lifted core revenues by 86 percent in the second half of the year. And the company said sales of the product in January and February 2000 are well above the same time last year.

But Chairman David Potter warned investors that Psion's focus on developing products for the wireless Internet would continue to come at the expense of profits.

"Our objective over the next several years will be to exploit the opportunities presented by our central position in these fast-growing markets. The scale of investment will continue to hold back profits," Potter said in a statement.

Long term, Psion's goal is to develop a range of pocket-sized computers combining the functions of its personal organizer with cell phone and Web surfing capabilities.

Through a new Internet division, Psion said it would release a new electronic organizer with mobile communications in the second half of 2000.

Psion also said Wednesday it would sell 100 million pounds worth of shares to raise money for acquisitions, including 1.6 million shares from Potter and other insiders.

Combined with cash on hand, the offering will give Psion a $150 million shopping budget.

The company wasted little time in making its first buy, reporting it had paid $2.25 million for a 3 percent stake in Quicknet Technologies, a U.S.-based company which makes Internet telephony products.

In addition, Psion announced a 4-for-1 share split payable May 8. But perhaps the best news was the possibility the company will spin-out its Symbian venture as an independent company.

Potter said once Symbian stems its losses starting in 2001, major shareowners may decide to float shares in the venture.

If that should happen, look for a repeat of the frenzy surrounding today's Palm offering, as investors fight hand over fist to gain early ground in the next-generation wireless frontier.