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R&D and expansion costs hit Psion net

Minnow betting on big-time shoulders heavy burden

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Psion's second half net income was down 74 per cent, to £2.8 million, largely because of cost of investment, according to CEO David Levin. "The cost of delivering on new technology is significant," he said, and the company expects its share of Symbian-related costs to increase by at least 20 per cent. Symbian costs are however by no means the full story. Psion's modem business used to contribute substantially, but standalone modem sales are dropping off, and with the rise of wireless communications this can only get worse. Levin is also betting big on R&D to transform Psion into a more communications-oriented, consumer electronics type company, and if Psion is going to play with the big boys here, it has to shoulder heavy R&D costs. In order to fund this and future expansion the company is issuing £100 million worth of new shares. This will be used to invest in the company's online business via the newly-formed Psion Internet division. Psion put its toe into online waters last year on the launch of the Revo, and now intends to ramp this up. According to Psion Internet MD Gareth Hughes: "We will partner with the leading content and service providers to deliver an innovative and compelling advanced mobile Internet service." If Psion's going to do this on £100 million it's going to have to do a lot of leveraging of relationships with the likes of Vodafone as well, we reckon. The company's full year sales were down from £159.9 million to £150.4 millio, with profit (excluding exceptional items and te share of the Symbian costs) down 18 per cent, from £13.2 million to £10.8 million. Intriguingly, Psion has also taken a 3 per cent stake in US company Quicknet. Quicknet specialises in Internet telephony, producing PCI and PC Card adapters designed to support enhanced voice communications over the Internet. They run under Win9x and Linux, but it's not immediately clear how this fits into the Psion big picture, if at all. ®

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