Psion's lesson

Psion's decision to pull out of the handheld computer market could just save the company.

This market is suffering like the rest of the economy. And it is likely to suffer more and suffer for longer. Whether bought by individuals or businesses (you know that 'vital business use' line) handhelds are fun gadgets. When times get hard they are the first buying decision to be postponed or cancelled.

A shrinking market isn't the end of the world as long as there are other markets to fall back on. Most of Psion's competitors are in this position. Compaq's iPaq is enjoying great sales at the moment but if they tail off it has other sources of revenue.

Psion found itself in a market that is about to get seriously competitive. Big players like Acer, Dell, HP and Toshiba are lumbering in.

They want the lucrative corporate market and are well placed to seize it because of partnerships with Microsoft making synching into corporate networks a comparative breeze. They also have the channel partners to get corporate sales.

At the lower, consumer end, handheld companies are under pressure from mobile phones with their ever-increasing number of functions.

Stuck between these two hard places is Palm - squeezed on one side by ever-cheaper laptops and on the other by ever-cleverer mobile phones.

Palm makes great hardware and great software. And its handhelds are very popular - top sellers, however the market is measured.

Palm's problem is being both a hardware and a software company. It makes devices and licenses its software to others who want to make them.

This division of resources makes life difficult. Palm needs to decide what it is: a software company or a hardware company.

Despite its cult following and massive sales Palms could easily end up going the way of the Apple Newton, if not the Psion.