Psion warns that downturn in modem sales will hit profits

PSION, the handheld computer maker, yesterday issued a blow to shareholders when it warned that Dacom, its data-communications division, had suffered a sudden downturn that was likely to hit profits this year.

The warning wiped 12 per cent off Psion's shares, puncturing the euphoria surrounding Symbian, its software joint venture with Nokia, Ericsson and Motorola, that has propelled its shares to new highs in recent months.

Psion said manufacturers of portable notebook computers had started installing "embedded" modems - communications devices that are built into the computer's circuitry - earlier than expected.

The move would "severely affect" sales of Dacom's plug-in card modems, which have enjoyed strong growth in demand in recent years. Psion shares closed at 832.5p, down 115p.

"We saw it coming, but it happened faster than we predicted," a Psion spokesman said. In the six months to last June, Psion sold over 300,000 card modems, more than double the amount it sold in the same period of 1997.

The company said it had been developing new products to offset the predicted fall in demand for card modems, but that these would not contribute to profits until the second half of the year.

Dacom is concentrating on producing PC cards which are capable of connecting portable computers to mobile phone networks or of delivering data over high-speed telephone lines.

City analysts slashed their 1999 profit forecasts for the company from pounds 12m to pounds 10m. They added that the warning did not affect the company's 1998 results, due to be released in March, which are likely to show pre-tax profits of about pounds 11.4m.