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Psion can pay Symbian dues (true)

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At some point the Symbian tail will wag the Psion dog, financially speaking. And then we will be in an ARM/Acorn situation.

But not yet: the sometime PDA maker today said it will begin to make a profit from Symbian OS licenses once unit sales hit 15-20m per annum. In the meantime, the business continues to incur heavy costs: its share of funding Symbian (mostly by way of a rights issue) in the first half of 2002 was £5.9m.

For good or ill, Symbian royalties is where Psion's big future lies. But how to sustain itself until the revenues start flowing through? The loss making operating businesses are mostly going or gone: the company is continuing to wind down its modem unit, Psion Digital, joining the consumer handheld division on the scrapheap.

Operating energies are now focused on Teklogix the dull but worthy Canadian industrial handheld business acquired in 1990 for £243m - £100m in cash. Unfortunately "the most important acquisition that Psion has ever made" is also lossmaking - and the big markets for its products are still in doldrums with little sign of escape. But it generates cash - enough to support Symbian cash calls. That must be great for the morale of the Teklogix people - their major purpose is to generate enough dosh to subsidise Psion's investment in Symbian. - Psion claims that it has a stable operating platform capable of supporting Symbian cash calls.

Which is just as well: Psion has around £26m in net cash and marketable investments, enough to fund losses for less than six months at the current burn rate. In the three months to June, Psion recorded a pretax loss of £15.4m on sales of £70.8m, compared with last year's whopping £54.4m loss on sales of £100.5m. Sales from the continuing businesses were £62.1m. However, most of Q2 2002 losses were writedowns and amortization of goodwill - Psion recorded a small operating profit of £2.2m.

But there is a lot of goodwill to wipe out - the firm's net assets stand at £185m, of which £131m is goodwill.

Amortizing goodwill will have no effect on Psion's operating performance, impacting merely its tax bill, and more importantly, reducing shareholder assets. ®

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