Nokia grabs Psion's Symbian stake

Psion's decision to sell its chunk of Symbian could damage the operating system's chances of dominating the smart phone market. Now analysts believe Symbian looks like it's just Nokia's baby.

Graeme Wearden Special to CNET News.com
4 min read
U.K. handheld computer manufacturer Psion has agreed to sell its stake in Symbian, the wireless operating system maker, to Nokia.

The agreement, announced on Monday, will give the Finnish mobile phone maker effective control of Symbian. It also means that Psion will concentrate on making specialized mobile technology products for companies through its Teklogix arm, rather than continuing to play a part in the consumer electronics market.

Nokia is expected to pay around $251 million (?135 million) for Psion's 31.1 percent stake in Symbian--$173.7 million up front followed by further payments depending on sales of Symbian devices in 2004 and 2005. This values Symbian as a whole at $810 million.

Psion says that the deal represents good value for its shareholders, as floating Symbian on the stock market with an initial public offering isn't seen as sensible at present.

"The business of Symbian is now maturing, and an IPO remains feasible, but changes in the wireless industry mean that the practicality and timing of the IPO is subject to significant uncertainty," said David Potter, chairman of Psion, in a statement on Monday.

The sale is still subject to regulatory approval and also to the approval of Psion's shareholders. Potter, who owns some 12 percent of Psion, is committed to voting in favor of the deal.

For handset makers, in an industry which expects to sell over 550 million phones in 2004, the takeover narrows their choice of suppliers for new software to two major players--Nokia and Microsoft.

Leading handset makers Samsung Electronics of South Korea and Germany's Siemens, as well as other handset makers, are Symbian shareholders. The deal will force them to buy key software from a company controlled by a rival.

"The other investors in Symbian will now have to decide if they want to be part of Nokia or Microsoft. They're caught between a rock and a hard place," said John Strand, a mobile telecommunications consultant in Copenhagen.

Finding Symbian's place
Symbian is the clear leader in making operating software for advanced mobile smart phones that run personal computer-style functions such as calendars, contact lists, games and electronic mail on top of voice calls and other traditional features.

The company was created in June 1998 as a partnership between Psion, Nokia and Ericsson, with Motorola becoming a shareholder a few months later. Symbian was meant to drive the smart phone market through the creation of operating systems, based on Psion's EPOC software, that could be used by any mobile phone maker.

However, Motorola eventually sold its stake to Nokia and Psion, in a move seen by analysts as evidence that other operating systems--perhaps made by Microsoft or based on Linux--could instead dominate the smart phone operating system market.

According to Dean Bubley, an analyst at Disruptive Analysis, the sale of Psion's stake to Nokia is confirmation that Symbian is largely synonymous with Nokia, rather than being the crossindustry platform it was once meant to become.

"This morning's announcement indicates that most other Symbian licensees are using the operating system just for niche products, rather than core and strategic parts of their product line," said Bubley.

Bubley added that this was particularly true of other licensees of Series 60, which is Nokia's implementation of Symbian for mobile phones that only use their numerical keypad, rather than a stylus, for inputting.

Bubley also believes that the sale may reflect market uncertainty about the mass-market potential of smart phones, given the levels of functionality that operators want to offer.

"Disruptive Analysis believes that a major issue emerging this year will concern mobile operators' escalating customer support costs related to handsets with overly complex software," he explained.

Playing the field
More than 2 million Symbian-based smart phones were sold in the last quarter of 2003, according to recent figures that showed it was becoming an increasingly powerful competitor. But some observers believe that Symbian's future may be clouded, now that it is clearly under the control of a single mobile phone company.

"Symbian has been assiduously courting the operator community, promoting itself as willing to compromise in order to help them achieve their goals. With Nokia in the driving seat, this pitch loses its credibility," warned Jessica Figueras, a practice leader of TelecomsIT at analyst firm Ovum.

"Operators may conclude that they were right to be suspicious of Nokia's motives, and should press on with the alternatives. Nokia might have reflected that, at a time when it is still wholly dependent on shipping handsets, this is no time to alienate those who might help it diversify, namely mobile operators and the other Symbian licensees," Figueras added.

For Psion, though, the future will revolve around creating mobile technology products for individual companies--such as handheld devices for use in warehouses, at airports and for automotive firms.

"Psion now intends to support Psion Teklogix's organic growth with prudent acquisitions and investments," said Alistair Crawford, the chief executive of Psion.

"These acquisitions will either add to the existing activities and be justified by the subsequent cost savings and efficiencies that will be available, or they will accelerate the expansion of the business into adjacent markets and technologies," Crawford explained.

Graeme Wearden of ZDNet UK reported from London. Reuters contributed to this report.