Psion shareholders approve Symbian sale to Nokia

Acquisition still has a long way to go before being settled

Nokia Corp. took another step forward in its effort to acquire Psion PLC's stake in operating system developer Symbian Ltd. after Psion shareholders on Friday approved the deal.

In February, Psion announced its intention to sell Nokia its 31 percent stake in the wireless operating systems (OS) business Symbian, which would make Nokia the majority shareholder of Symbian, bumping its share from 32.2 percent to as high as 63.3 percent. For that Nokia would pay Psion a fixed sum of £93.5 million ($168.6 million) and a variable payment of £0.84 for each Symbian OS-based device sold during 2004 and 2005.

Though a third of shareholders in Psion, including the Phoenix Asset Management Ltd. investment group, which owns a 13 percent stake in Psion, moved to block the deal, the majority gave the agreement a green light after a three-hour extraordinary general meeting in London.

Though the Psion vote is seen as a positive outcome for Nokia, there is still a long way to go before the whole thing is sorted out, according to Chris Jones, a senior analyst at Ltd. in Reading, England. "It still remains to be seen what the other Symbian shareholders will do," Jones said Monday.

Nokia has to gain regulatory approval to complete its purchase of Psion's share in Symbian in Finland -- which it acquired on Thursday -- as well as Germany and Austria. Assuming Nokia is granted such approvals, there will be a seven week period under which Symbian's other shareholders can exercise their pre-emption rights to buy a portion of Psion's stake in Symbian.

Other Symbian shareholders include Matsushita Electric Industrial Co. Ltd. (Panasonic), Samsung Electronics Co. Ltd., Siemens AG, Sony Ericsson Mobile Communications AB and Telefonaktiebolaget LM Ericsson. Psion's sale of its Symbian shares faces a regulatory deadline of Nov. 13, though the company has said it hopes to finalize the deal by June.

If all of the other Symbian shareholders decides to purchase their share of Psion's Symbian stake, Nokia's overall share of Symbian after the completion of the deal would be 46 percent.

Sony Ericsson said it was currently considering the possibility of increasing its share in Symbian. "We haven't made a decision just yet but we are looking into it," said Sony Ericsson spokesman Peter Bodor on Monday. "We will make a decision by mid-April."

A spokesman for Ericsson said that the company would not discuss what its intentions were in regards to increasing its stake in Symbian, while representatives from Matsushita, Samsung and Siemens could not be reached for comment.

"Individually and more importantly, collectively, it is in the interests of the other Symbian shareholders to take advantage of their pre-emption rights and keep Nokia from gaining a majority share in Symbian," said Julian Hewett, an analyst with London-based Ovum Ltd. "I'm sure they are all talking together about that option now."

All five companies indicated last month, after Psion announced its intention to sell its Symbian shares to Nokia, that they had been assured by Nokia that Symbian would continue to be run as an independent entity. As such, they would not, for the time being, jump ship as Motorola Inc. did last August when it sold its 19 percent stake in Symbian to Nokia and Psion.

"There has always been something of an awkward situation in that Nokia's biggest competitors are also its partners in Symbian, but it is probably in the best interest for all involved to keep Symbian going because it is such a giant in the market," Jones said. "And its also in Nokia's best interest to keep Symbian independent."

Hewett also agreed that Nokia would be best served by a Symbian that has the perception in the market of having some independence from the market dominator Nokia.

"Symbian already has close to 100 percent of the smartphone market worldwide, and though Microsoft (Corp.) is expected to make inroads, it will be an uphill climb for them," Hewett said. Smartphone is a generic name for mobile phones that center around voice communication but that also have information capability.

Though most new mobile devices using Symbian had been launched by Nokia, competitors are rapidly coming out with their versions of Symbian-based devices. Last month, Panasonic released the X700, while Motorola launched the A1000, both using Symbian. Additionally, LG Electronics Inc., the world’s fifth largest mobile phone manufacturer, last month licensed Symbian OS as its platform for development of smartphones for 2.5G and 3G (third generation) networks worldwide.

"Unless Psion's sale of Symbian ends with an outright Nokia majority, the sale won't make any difference (to Symbian's market share) at all," Hewett said. "Psion had been a pretty silent shareholder, while the other shareholders are also licensees of Symbian. Psion was always the odd one out."

What the intervening period between now and the Psion sale of its Symbian shares does bring is a small window of opportunity for other vendors, such as Microsoft, Palm Inc. and PalmSource Inc., to try and attract suppliers.

Last month, for example, PalmSource, in Sunnyvale, California, was already offering open arms to Nokia's competitors.

"Nokia had gradually been taking more and more control over Symbian. It underlines that we are the only independent choice for smartphones," said Michael Mace, PalmSource's chief competitive officer, in February. "We think this (Nokia's purchase of Psion's Symbian shares) will help us a lot with our licensing because there are a lot of people who are not comfortable licensing software from their biggest hardware competitor."

According to Jones, it may be as late as May or June for the other Symbian shareholders to decide what to do about pre-emption rights over Psion's share in Symbian. "That gives Microsoft and PalmSource a somewhat unique chance to do what it would always like to do: attract vendors to their platforms. They'll push, but it may be a hard sell."

(Joris Evers in San Francisco contributed to this report.)

Copyright © 2004 IDG Communications, Inc.

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