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Neil Thapar and Tony Glover

Novenber 09, 2003

Nov. 9--Nokia, the Finnish mobile phone giant, is considering a takeover of Britain's Psion as part of a battle for global domination of the software technology that will decide the ultimate winner in the $100 billion (UKpound 60 billion, E87 billion) market for mobile phones.

The two companies already know each other well and are big shareholders in Symbian, the privately-owned software venture spun out of Psion to establish its advanced mobile operating system as an industry standard.

Nokia plans to accelerate Symbian's adoption across the mobile industry to head off a serious threat from a rival Microsoft technology. As a result, the Finnish giant is taking a close look at bidding for Psion, according to an industry source with knowledge of Nokia's plans. "There are clear signs coming out of Nokia that it is planning to make a move on Psion," he said.

Any offer would have to be pitched at a substantial premium to Psion's stock market value of UKpound 312 million and could price the group at well above UKpound 400 million.

The two sides are not yet in formal bid negotiations but regularly talk to each other on business and technology issues. Psion's founder, David Potter, the visionary behind Symbian, is on holiday in South Africa but is known to support Nokia's plans.

A final decision on a bid is not expected for several weeks but is likely to be given a high priority by Nokia's management. One reason is that Symbian, led by chief executive David Levin, is planning a stock market flotation early next year to raise funds for its development. That would probably boost its value substantially and make it costlier to buy.

This Christmas could also be crucial for Nokia's timing as the battle for control of mobile market is set to heat up with the launch of a new generation of handsets with advanced functions such as games and video.

The Finnish giant already controls 40 percent of the handset sector but is facing a serious threat from Microsoft, which wants to extend its stranglehold on PCs to the faster-growing mobiles market.

Symbian boasts several big handset-makers among its shareholders but its two biggest investors are Psion with 31 percent and Nokia with 32 percent. But the worry is that it will be left behind by Microsoft's rival software platform, Smartphone. Earlier this year, one of Symbian's shareholders Motorola pulled out of the venture and sold its share, moving to Microsoft technology.

Leading industry experts say that by acquiring Psion, Nokia would gain majority control, enabling it to set the pace. "In the battle that is raging between Microsoft and Nokia to determine whose operating system dominates the smartphone market," said a Finnish wireless industry consultant, Arto Karila, "it would be an advantage for Nokia to acquiring a controlling stake in Symbian.

"This would enable it to respond to Microsoft's tactics far faster and more effectively than if it has to sit on a committee with other Symbian shareholders."

Other industry experts say Nokia may also make savings between Symbian and its own proprietary software technology, the series 60, which has been developed separately but is compatible with Symbian.

Nokia has also thrown more than 1,000 software engineers behind Symbian and there is a growing view that it feels the time has come to capture the full benefits. "It is beginning to see Symbian as its own baby," says analyst Paul Kavanagh at London stockbroker Killick.

But a backdoor takeover through Psion runs the risk of upsetting Symbian's other investors that include Samsung, the Korean electronics group, Sony and Ericsson, the big Swedish telecoms company. But most of these handset makers have already committed themselves to Symbian technology and have also signed up to some of Nokia's own platforms for their next generation of phones.

The total market for handsets with advanced operating systems is expected to be total about 300 million units over the next few years, according to estimates by Japanese investment bank Nomura. By 2008 it believes Symbian could control a 40 percent share, with Microsoft having another 20 percent and chip designer Qualcomm taking a 28 percent share through its rival system, Brew.

Nokia and Psion said it was not company policy to comment on market speculation.

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(c) 2003, Sunday Business, London. Distributed by Knight Ridder/Tribune Business News.

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