Original URL: http://www.theregister.co.uk/2004/03/09/ms_linux_board_battles_psion/

MS, Linux, board battles – Psion boss lists the threats to Symbian

Defence of deal paints picture of company up agin it

By John Lettice

Posted in Mobile, 9th March 2004 16:51 GMT

Psion's tussle with shareholders irate over its proposed sale of its Symbian stake to Nokia is throwing up some interesting background to the deal. In a meeting with shareholders Psion chairman David Potter suggested that some of the shareholders in Symbian were effectively blocking an IPO, that it was therefore "very unlikely to occur", and that there were "very material" risks of Psion's shareholder value being locked into Symbian, and diminishing if commoditisation of the handset business sucked value out of the company's offerings.

In addition, Symbian remains loss-making, and the cost of maintaining its position will in Potter's estimation will increase "in order to compete against Linux and Microsoft and the rest of the market that is there".

Potter himself is facing the very real threat that Psion shareholders will derail the deal, which they see as poor value, a consequence of Potter not having sufficient appetite for risk. He has therefore been put in the position of having to explain why it is good value for Psion shareholders, which necessitates revealing some of the scary monsters Symbian is going to have to deal with. Aside from disagreement over IPO, widespread commoditisation that Symbian probably wouldn't be able to deal with and punishing competition from Microsoft, Linux and who knows what else, the shareholders have differing aims, and instead of the base broadening, it has become more concentrated "in two players: Psion and Nokia". And "the single biggest problem is that the shareholder base of Symbian is not owned by a collection of like-minded for-value profit oriented companies who are interested only in the optimisation of the business with the benefit of shareholder value in due course."

So you get a picture of a Symbian where Nokia (who else?) is blocking an IPO, and which is therefore surely-ill prepared to soldier on as previously. And if it needs more money to just stay alive (which is what Potter's saying), never mind prosper, where is it going to get it? You could see the choice as being a stand-off which would threaten to accelerate a decline in shareholder value, or Potter taking what money he can get for Psion, and running.

The dissident shareholders of course argue that Psion ought to be able to get more money, or alternatively, could try to force an IPO. That's surely an unacceptably messy option, given that it would surely have to go ahead against the wishes of the other biggest shareholder, but it's interesting nevertheless. The Symbian shareholders' agreement says: "Shareholders agree to consider in good faith and with reasonable diligence the opportunity for the company to commence an IPO by December 31, 2003 with an expected completion date of June 30, 2004. The foregoing does not preclude the Shareholders from evaluating all other alternatives for the business at such time to be evaluated on the basis of creating shareholder value."

Presumably the shareholders have considered this, and rejected it. But what then? We have here what you'd call a watershed date, after which, there being no IPO, the shareholders should have been "evaluating all other alternatives... on the basis of creating shareholder value". But although they should have proceeded on that basis, how could they have if, as Potter tells us, they are not "like-minded" companies interested in the pursuit of shareholder value?

This contradiction would seem to us to bear the seeds of breach of fiduciary duty. Clearly, it is not the case that Symbian can just carry on as normal, as David Levin improbably claimed it could in Cannes. It was intended to develop into a broad-based company that would be a dominant force in the mobile device arena, and that would move to IPO, whereas now it is not moving to IPO at all, in becoming narrowly-based, and could find itself left on the sidelines as the rest of the world moves on. Potter's suggested solution is the Nokia one, but if this is blocked by Psion's shareholders then Symbian needs a whole new forward-looking plan that takes account of the massively changed landscape. And it needs it pretty urgently. ®

Related links

Potter transcript
Legal advice to Psion shareholder group