A man who sells pounds 12.6 million worth of shares in his company one moment, only to see them more than quadruple in value a few months later, surely has a right to feel aggrieved. But David Potter, founder, chairman and chief shareholder of technology wizard Psion, is getting used to it.
'It's always the case,' he says ruefully. 'I always joke that the best buying signal for Psion shares is when I sell. If you look back over the years there is a correlation between my selling and the price going up.' He uncoils his tall frame from the settee in his West End office, strides towards his desk and, with long, elegant fingers, pulls from a pile of papers a neatly drawn graph that proves just that.
It is not that he is a lousy predictor of his company's fortunes but, as a director, there are obvious restrictions on when he can sell. Before shedding too many tears over his notional loss at the end of last year, though, we might recall that he still owns some 14% of the company after another (and, at pounds 65 million, rather more rewarding) sale of shares in early March; in these past few months his personal fortune has increased stratospherically, though most of it is still on paper.
'A founder-director is not free to sell, so one needs to be cautious about the paper value,' he reminds me. Last December's market fluctuations make Potter's point. The price of the shares all but halved, from pounds 30.05 to pounds 17.50, on the announcement by Microsoft that it had done a deal with Ericsson, the Swedish telecoms manufacturer, to fit its micro-browser into Ericsson mobile phones to allow them to access PCs and parts of the internet.
Ericsson, along with Nokia and Motorola, are partners with Psion in Symbian (in which Psion holds a 28% stake), whose EPOC software competes in the swiftly developing smart phone market with Microsoft's CE system. It was the formation of Symbian in 1998 - on Potter's initiative - that launched Psion's share price on its remarkable climb. On Ericsson's instant assurance that its Microsoft deal did not mean it was going to pull out of Symbian, the Psion share price quickly recovered. And this year it has surged on past the pounds 50 mark, launching it into the FTSE-100. A four-for-one share issue will bring the price down and improve liquidity.
Potter takes as detached a view of all this as anyone can with many millions of his personal fortune at stake. He points out that, although the multiplication of the share price has been extraordinary (it stood at less than pounds 5 at the end of 1998), it has broadly kept pace with the telecoms sector in Britain, and the parallel market in the US has seen even greater gains.
'Looking at it in old-fashioned capitalist terms,' he declares, producing another chart, this one showing how the Psion price has tracked the ups and downs of the sector, 'the economic system is doing its job. In the past two or three years the perception has grown that there's a massive economic revolution under way surrounding digital technology, IT and communications. It's coming in wave after wave. Fund managers and trustees have realised that they have pensioners who will be drawing their pensions in 2020. What is the world going to look like then? Clearly a lot of economic value is going to be associated with the technology area. So the trustees ask for 20% of their portfolio, or whatever it is, in these sectors. Fund managers have gone out to do that, so there's been this huge wall of money looking for investments in this area, and there aren't enough investments, so the prices have gone up.
'With new internet-based companies being created almost daily,' he continues, 'the investment famine should eventually ease and prices stabilise. In a few years this massive wall of investments will mature and become viable, and that will bring the price down. Isn't that what the economic system's meant to do - to allocate resources to new economic sectors? We might laugh at the values and say it's mad, but the truth of the matter is that it's the economic system working extremely well.'
So what does that indicate about Psion's future market performance? Potter is cagey. 'I don't set the markets. Taking the sector as a whole, some will win substantially and others will have very little value. Psion has every chance of doing real business with real turnover and real profit based on real values, if you take a five- or 10-year period - and you do have to take a long-term view.'
Much hinges on the transatlantic battle over smart phone technology, and who sets the standard that the rest of the industry follows - as Microsoft did with Windows for PCs.
Deal-making in this sector has been frenetic. Before the end of last year the two other Symbian partners, Nokia and Motorola, signed a joint development deal with the makers of the Palm palm-top computer, the US's answer to the Psion range. Palm, which floated from its parent 3-Com in March valued at a sensational dollars 53 billion, signed another deal in February with Psion and other key partners (Nokia, Motorola, and IBM) to form SyncML, a project to make hand-held devices fully compatible with PCs.
The common purpose of all these projected devices is principally to provide internet access on demand in any location, instead of only via the PC. 'It's the wireless internet,' says Potter. 'It makes information available wherever you are.' The net-ready phones will be on the market towards the end of this year and Psion estimates that one billion (yes, one billion) of them will be sold in the first two years, with the market multiplying even more rapidly beyond that. The devices stem from the growing certainty of Potter and others in the industry that the internet, not the PC, holds the key to the next stage of the Information Revolution.
'If you'd asked me this question 10 years ago,' says Potter, 'I would have said that the PC would be the fulcrum of the industry, but the world has moved on, and I think it's clear now that it's the internet. That's our vision and that's why we formed Symbian, to bring the wireless players together with our software experience to make palm-top, highly portable computer products. We're close to getting out there and establishing the market. We think we're getting quite close to the winning post.'
Yet the spate of deals and alliances are a sure sign that Symbian is not going to have the race to itself. Its main competitor - surprise, surprise - is Microsoft, whose Windows CE operating system already powers many palm-top devices on the market, competing against Symbian's EPOC installed in the Revo and other new models in the Psion range.
None of the existing devices incorporates a telephone, but Microsoft shares Psion's view that this is how the market will develop. Oliver Roll, director of business marketing for Microsoft in the UK and Ireland says: 'Last April we changed our view from a PC in every home and on every desk. Increasingly what people need is to get what they want whenever they want it and regardless of what device they're using.'
Although the competing software providers may share the same vision of the future of the industry, they have, as you would expect, sharply opposed views as to the merits of their rival systems. Potter dismisses CE as a scaled-down Windows; Microsoft responds that Psion may know all about organisers, but not about accessing the net.
Says Roll: 'The Psion device is good at managing contacts and calendars. It may start to fall down on multi-function devices, where CE will come into its element. CE is an operating system made up of about 120 components, making it easy to build multi-function devices. It is not a scaled-down version of Windows. We've actually built it from the bottom up, to focus on these small devices. That's why it has the edge over Psion and Symbian.'
David Levin, Psion's chief executive, could not disagree more. 'CE is at present a terrible product but they're going to work to make it better. It's a long way behind. It's a question of where you come from: Psion built its devices with low power, low memory and limited operating power. They had to be very efficient and work in a rugged, robust mobile environment. Windows CE's genesis is the big PC software. It's a cut-down version of that. The result is that it's unstable. Whoever gets the handset thing right, the handsets will be the same everywhere.'
Levin has been chief executive since the end of 1998, when Potter, after an illness, decided reluctantly to draw back from day-to-day running of the business that he established in 1980. Born in Zimbabwe in 1962, Levin had previously been CEO of the business publisher Euromoney. He admits that he arrived at Psion with grave misgivings over whether Potter, 19 years his senior, would really be willing to draw back far enough to let him do what he believed needed doing.
'Working out how you're going to deal with somebody who's been in charge of running their own company and still owns a chunk of it - that was daunting,' recalls Levin. 'But it's been a pleasure. It's been a very effective working relationship which has been tried by difficult times as well as everything going swimmingly. He's been extraordinarily disciplined and there's a very clear definition of who does what. I run the company and David runs the board.'
The major policy change initiated by Levin was the sale at the end of 1999 of Psion's largest single manufacturing site at Greenford, west of London, to Flextronics, which will continue to make Psion products on contract. It reduces the number of Psion's employees from about 1,500 to fewer than 1,000. Levin explains: 'We had to become more focused on what we do well - the science, the design, the specification and the marketing - rather than say we're the world's best box-builders.'
Potter admits that it was difficult for him to yield a large part of his authority, but agrees with Levin that the handover has worked better than either expected. 'I've been very lucky or judicious in my choice,' he quips. For the past 10 years he has suffered from a kidney condition that necessitated a heart bypass operation. 'I had to confront the issue of serious illness, which we all have to do in our lives. I might have left the company in a difficult position if I became seriously disabled. In any case it's probably wise to step back from personal management, although I help David a great deal and I still play a wide role.'
The change has been especially traumatic for Potter because few major companies have been so closely identified with their founder as Psion. For a high-flying tycoon, his background is untypically intellectual. Born in South Africa in 1943, he moved north 10 years later when his widowed mother married a Zimbabwean. When he was 18 Potter came to Britain to take his first degree at Cambridge and then a PhD at Imperial College, London.
At Imperial he was a theorist dealing with problems not amenable to easy mathematical solution. He needed to make use of the computer technology that was then evolving - but evolving painfully slowly. It was still the era of cumbersome mainframes, occupying enormous amounts of space. 'I began to use these behemoths, these ludicrous machines, which didn't remotely have the power of Psion Revo, for example. And they cost millions of pounds. I became something of an expert in them and designed substantial software systems.'
Then came the microchip, and Potter immediately appreciated its significance. 'If there are opportunities in the world you need to grasp them. I was fortunate enough to be in an area that was really going to change the world in a huge way.'
In 1969 he married Elaine Goldberg, a journalist, and a year later became a lecturer at Imperial College. In 1974 he was made an assistant professor at the University of California in Los Angeles, returning to Imperial the following year when Elaine was expecting a child, the first of three sons. It was in California that he took his first tentative steps into the world of business and finance.
'While I was at UCLA the stock market crashed to 25% of its former value. I had always been interested in business and I used to read the financial press voraciously. The crash raised questions about the market economy as a whole, and there was a whiff of revolution in the air. I had savings then of about pounds 4,000. I wrote to my London bank and asked them to divide the money equally and invest in six companies that I specified. They all had a technology flavour about them and they seemed ridiculously undervalued in my eyes. It was my first investment in the market. When I came back in 1975 their value had tripled, which was very nice.'
That whet his appetite for further speculative forays. As a scientist he knew the value of research and observed that City analysts for the most part researched only large companies, ignoring smaller ones. So he set about finding small companies in interesting areas. His greatest success came not long after his return from America.
'I went skiing in 1975 and realised that all the Brits were going to the Alps and sleeping under these things called duvets, and then they came back here to sleep under those old blankets and sheets,' he says. 'I knew that they would soon throw all of those away and use duvets because they were more comfortable and it was much easier to make the bed. I thought it was inevitable that the demand for duvets would go through the roof, so I went to Selfridge's to see what companies made them. I found this little company called E Fogarty. I researched it and found it had just built a new factory, and then I had the chutzpah to go and interview the chairman. I told him I was a potential investor but not how little I was planning to invest. Then I sat in the pubs outside the factory in the evening and chatted to the workers about overtime etc, and got a complete picture of what was going on. I could see the opportunity and put 40% of my capital into Fogarty. The price tripled in 18 months. That was how I got my education in business and company matters, and some of the capital to start Psion. I think companies are fascinating. They've all got histories and lives and I find them intriguing.'
His first business venture on his own account was to publish software that other people had developed. In the late '70s computers were still a cottage industry and people wrote original software without much idea how to sell it. Potter packaged it properly and marketed it to retailers, paying a royalty to the original developers. A few months later he teamed up with Charles Davies, a former colleague at Imperial College and a gifted creator of software, to publish original titles of their own, including games and a flight simulator. (Davies is still with Psion, as director of development, as is another Imperial College alumnus, operations director Andrew Clegg.)
'The publishing thing was building up more and more and it was clear to me that I was going to make a lot of money. We'd built up a lot of titles. But with Charles I'd moved from publishing into development, which was where I wanted to go. The question was what these machines were for. They were not used by companies. Computers in 1980 for most people were still British Gas sending you a bill for pounds 1 million for a small flat, because they'd got the noughts wrong. There were funny little machines around - the Acorn Atom, the Apple II and the ZX80 - but people who were in mainframe computers regarded them as toys.'
Potter thought there was more to them than that. Psion was formed in 1980 and produced its first hand-held computer notebook four years later. 'It was a radical concept. There were calculators on the market but we had the idea of information management and we created the word organiser to try to describe it. We also invented the first solid-state disk, which was the core point of making a useful computer that would retain information when you switched off the power. Psion's two roots are innovation and software.'
While not denying the strength of the competition, Potter is convinced that Psion will continue to play a defining role. The market broadly agrees, although from time to time the company has fallen out of favour with investors, fearful that the sheer brute force and scale of its American rivals will snuff it out.
Potter takes all that in his stride: 'Clearly, there have been difficult times when the company has been under pressure, but that's part of business and there was never a time when I thought it was going to fall about my ears. My colleagues see me as being very conservative financially and I always encourage the board to follow a prudent financial policy, in contrast to the adventurous markets we are engaged in. One of the reasons we've survived is that we don't have borrowings. There will inevitably be ups and downs in the future, but the thing is to get through the downs and carry on to the ups and not get apocalyptic. I'm a long-distance runner. I actually used to do it as a sport and I learnt that you carry on running whether you're doing well or badly.'
DUVETS AND OTHER KINDS OF SOFTWARE
London, 1970: Mild-mannered lab dweller and physics lecturer David Potter spots the potential of computers, developing software to drive vast mainframe systems.
Los Angeles, 1974: Potter is on attachment at UCLA. Expecting a crash, he reinvests his savings back home. His investments triple in value in one year.
London, 1975: Potter spots the opportunity that is the duvet: invests 40% of his money in E Fogarty, a small British duvet manufacturer. Value of investment triples in 18 months. Raises capital that will help launch Psion.
AND POTTER GETS ORGANISED
1980: Psion (it stands for Potter Scientific Instruments Or Nothing) is founded on the back of Potter's continued software programming success. Potter moves from publishing software to development.
1984: The first Psion organiser; a miracle - it works (unlike much of the competition at the time).
1987: Psion is floated on London Stock Exchange at 53.1p a share - the beginning of a roller coaster share price ride. Generations of popular organisers follow - a great British success story. By the end of the decade Psion's hand-held computers are the only rival to market leader Palm Pilots. Potter chairs the Symbian joint venture (Psion in association with Ericsson, Nokia and Motorola) - an attempt to unite the mobile telephone with computers to create genuinely wirefree working thanks to Psion's own EPOC software. Psion is named by Microsoft as its biggest threat.
POTTER SCIENTIFIC INSTRUMENTS OR NOTHING!
2000: The pace of deal-making accelerates. Psion launches key ventures with IBM (creating business applications based on Psion's EPOC software) and Motorola (mobile internet access devices). 'Psion plays for supremacy on all platforms,' declares a Guardian headline in February - Psion joins forces with Palm, Nokia, Motorola and IBM to develop a high-tech standard (SyncML) allowing different high-tech devices to talk to each other. Joins the FTSE-100 in March after recalculation of index; shares rise to over pounds 50 each, valuing the company at about pounds 4 billion. Psion now established as one of the UK's few global leading companies. In Symbian it is now set for a head-to-head battle with Bill Gates' Microsoft for control of wireless working market.