HIGH-FLYER PSION’s SHARES GO INTO FREE FALL AFTER PROFITS WARNING ON DACOM

Psion Plc shares went into a vertiginous dive, plunging 30 pence to hit bottom at 90p yesterday after the company warned that profits and turnover for the first half of 1990 are going to be significantly lower than anticipated. The company lays the blame firmly on its Dacom Systems Ltd subsidiary, which expects to report half-year turnover down by at least 50% from UKP1.6m in the first half of last year, and a substantial loss compared to a UKP300,000 profit in the first six months of 1989. The drop in turnover seems to be due to two factors. Dacom experienced a reduction in custom modem business, largely because two significant contracts with manufacturers of portable computers, one of which was Toshiba, were completed and terminated. Secondly, Dacom’s joint managing directors are accused of being over-anxious to maximise their own interests, and they were fired in March. A further 25 employees were made redundant at the same time as part of a cost-cutting exercise. Psion says it is not happy with the way the Dacom acquisition has gone, although company contributed more than 50% of Psion’s growth in 1989 (CI No 1,255). It believes that the combination of new management and a broader product range should restore some stability to Dacom which has been largely dependent on the mercurial business of supplying modems. It is about to distribute high-performance modems from the Californian company Digicom, and is also manufacturing modems for Psion’s MC product, launched in September of last year (CI No 1,271). The rest of Psion Plc is expected to report a 40% increase in sales over the period to June, and the company is projecting 25% improvement for the year. However, Psion accepts that Dacom’s problems will have have an impact on the group’s profitability. The chairman, Dr David Potter, has previously denied that the company’s high share price was placing the company under any undue pressure. But he did express disquiet at the feeding frenzy of analysts that over-reacted to talk of new products, and he’d like to see a more stable trading environment.