Psion Plummets as Euro, Costs Erode Profit Outlook
--From AOL.-- Cooters
London, Oct. 27 (Bloomberg) -- Psion Plc's shares fell as much as 31.3 percent after Europe's largest maker of hand-held computers said full-year profit will be ``well below'' analysts' estimates because of a weaker euro and higher component prices.
Analysts had expected a profit of 6 million pounds ($8.6 million) to 11 million pounds, said Chief Executive David Levin in an interview. The figure will be well below that, he said, without giving further details.
Psion is being squeezed by a strengthening dollar, which it uses to pay for components, and a weakening euro, which it gets for a high proportion of its sales. It is also being hit by an industry-wide shortage of parts for mobile devices that sent parts prices higher.
``There's no solution to their problems in the short term,'' said Jan-Eric Umiastowski, who helps manage 400 million euros ($333 million), including Psion shares, at Financiere Rembrandt. ``I was confident in the company until today. Now I worry a bit about the near-future.''
Psion shares fell as much as 180 pence to 395p, their biggest decline Dec. 8 1999. The decline wiped 745 million pounds off the company's value, taking it to 1.8 billion pounds.
Industry-Wide Shortage
The London--based company is not alone suffering from a parts shortage. Palm Inc., the world's largest maker of hand-held electronic organizers said on Monday that it is looking for more component suppliers because of the shortage. Games console makers and mobile-phone makers have expressed similar concerns as they prepare for Christmas-season sales.
``We're sharing the shortage of components with mobile-phone makers, '' Levin said. Psion, which buys mostly from Asian companies, is ``more aggressive in sourcing'' and ``trying to find second sources and get long-term commitments from our suppliers.''
Changes in the exchange rate narrowed Psion's margins by about 4 percent for the first three quarters compared with the same period last year. The euro weakened 7.8 percent against the pound and 17.4 percent against the dollar in the year through Sept. 30. The dollar rose 11.7 percent against the pound in the same period.
Rising prices of components will reduce margins by about 2 percent for the second half of the year, the company said.
``Sales are doing well, demand for our computers is very strong,'' Levin said. ``We can't control the weakness of the euro against the dollar.''
Modems
Psion also said it plans to take a 2.5 million-pound charge to restructure its Psion Connect unit, which makes modems, to return to profitability in 2001. Sales of add-on modems, which connect personal computers to phone lines, have been declining this year as manufacturers switched to integrated modems. Sales fell more sharply in the past few months, Levin said.
In the long-term, Psion plans to replace the modems sales by ``Bluetooth'' technology, which enables devices such as personal computers, mobile phones and fax machines to communicate wirelessly. The sales and administration of the modems unit will be reorganized, Levin said.
Psion completed its biggest acquisition ever, the purchase of Teklogix International Inc., a Canadian marker of software and wireless equipment, last month. Acquisition costs are expected to total 3.5 million pounds, 2 million pounds of which will be charged this year, Psion also said.
Plans to sell Symbian Ltd., which makes software for mobile Internet devices, to the public are ``very much on track,'' Levin said.
Symbian, owned by Psion, Nokia Oyj, Motorola Inc., Ericsson AB and Matsushita Electric Works Ltd., competes with similar technologies by Microsoft Corp. and Palm. The first Symbian phones by Ericsson are already on the market, and 20 other products are under development, Levin said.
``Our long-term strategy is in good shape, our new acquisition is doing well,'' Levin said. ``We're trying to position ourselves for the time after the Symbian float.''
Oct/27/2000 6:05 ET |
