Thousands of faulty handheld devices have hurt Psion, which warned yesterday that production problems had sent it plunging into the red for the first half of the year.
A British pioneer that was once in the global vanguard of handheld computing, the palm-top technology manufacturer’s shares slumped by 17 per cent after it revealed that a long-term attempt to reinvigorate its fortunes had run into a costly hitch.
Psion has been grappling with quality problems afflicting one of its older product ranges, which it declined to identify. Thousands of the devices have over-sensitive touchscreens, reacting even when users apply gentle pressure by squeezing the sides of the casing.
“This is a road hump, but, let’s be honest, it’s a deeply frustrating one not only for us but our investors,” the chief executive John Conoley said. “I hope people can see beyond it.”
The problem has left Psion nursing a £4 million loss for the six months to June, compared with a profit of £700,000 a year ago. Revenue has fallen by 4 per cent.
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Psion’s personal organisers were once a must-have for ambitious business people, but the company lost out in consumer devices as the world embraced the BlackBerry and the iPhone. It has re-engineered itself to focus on personal digital assistants — used commercially by field engineers, couriers, postmen, warehouse workers and transport ticket inspectors. A key selling point is that its devices are sturdy — used, Mr Conoley said, by “guys with big fingers who don’t care about dropping them on the floor”. But the problematic devices failed to live up to this pledge. They worked if users were “dainty” with them but malfunctioned under “intense usage”.
The setback prompted analysts to cut their profit forecasts sharply. Ian Robertson, of Seymour Pierce, reduced his expectation for full-year profits from £11.7 million to £6.7 million and downgraded the shares from “buy” to “hold”. “This is a good, old-fashioned cock-up,” he said, “but it’s not something where you can say that the whole business is broken.”
Psion’s shares fell 15p to 74p, their lowest level for 12 months.
The warning comes a month after the company began shipping a new device called the EP10, which combines high-tech functions including a gyroscope, light sensor, GPS and digital compass. Mr Conoley said that Psion had launched three new products in nine months — a much more rapid rate of innovation than its earlier output of one substantial launch annually.
The market for handheld computers has been through significant upheaval. Other hardware manufacturers struggling to meet market expectations include Nokia, the BlackBerry maker Research in Motion and Palm, which was bought by Hewlett-Packard last year.
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Psion was once in the FTSE 100 but crashed out in the bonfire of stock market tech shares when the dot-com boom turned to bust in 2000. It now has a market capitalisation of only £125 million.