What a strange fruit Psion is. Only two weeks ago, the palmtop maker was ruefully admitting it was rapidly becoming a one-horse show as its hardware businesses were declining, but now it says it considers itself a "British Apple (AAPL) - Get Report."

On March 3, Psion confirmed analysts' worst fears that 1998 was a dismal year for its core hardware businesses: the communications division Dacom, the palmtop division and the industrial handheld-device division. Excluding exceptional items, Psion announced its pretax profit rose just 4.4% to 11.4 million pounds ($19.8 million) during the year, and all three of these core operations were declining.

Psion's shares in London ended down 1.8% that day, which would have been much worse had the company not been a major partner in

Symbian

, a joint venture between

Ericsson

(ERICY)

,

Motorola

(MOT)

and Nokia

(NOK.A)

. Symbian, in which Psion holds a 31% stake, is developing the next generation of mobile phones using Psion's EPOC operating system.

Like many others, Michael Hennigan, an analyst at

Williams de Broe

, believes the potential for Symbian is so great that by his sum-of-the-parts calculations, Psion's core businesses are worth perhaps 20% of the share price, while Symbian is worth 80%.

The earnings announcement confirmed suspicions that Psion's fortunes were becoming increasingly linked to Symbian's. Chairman David Potter even said that day that a separate listing for Psion is a "probable option."

However, the news has lifted the gloom over Psion's core businesses this week, and the shares bounced back to close Tuesday at 935 pence from 753 pence March 4.

Buried in the "Innovations" section of this week's Sunday

Times

was an interview with Geoff Kell, Psion's marketing director. Kell told the

Times

that Psion would reveal this month two new sub-notebooks with color screens. Furthermore, the company is discussing an alliance with

IBM

(IBM) - Get Report

to sell the machines in the U.S., a market where Psion has little presence.

The paper said the two new devices, Jedi and Quantum, are still prototypes, but by adding

Sun Microsystems'

(SUNW) - Get Report

Java software to the EPOC operating system, the machines are Internet-capable. The company hopes to sell 1 million of the new products over the next year. Kell was even quoted as saying Psion sees itself as "something of a British Apple."

The market, needless to say, got into a tizzy over the mention of IBM, but a spokesman for Psion tried to suppress some of the hype. "The trouble with journalists is they get a bit excitable," he sighs. "We are in discussions with a number of companies to badge these new products. ... We are talking to about 10 people, and IBM is one of them."

After botching the launch of its Series 5 palmtop, Psion has apparently gotten the message that marketing is not its forte. The spokesman explains that rather than spend millions of dollars on establishing a presence in the U.S. and the Far East, Psion is trying to strike up partnerships with domestic companies to sell these new notebooks under their names.

Also this week, Psion's Series 5 palmtop, which was dying a slow death from the success of

3Com's

(COMS)

Palm Pilot, got a shot in the arm from a Symbian partner. Ericsson unveiled the MC 218, a small handheld computer that is not only the first non-Psion device to use the EPOC system but also is so similar to Psion's Series 5 palmtop that Ericsson outsourced the manufacturing of the MC 218 to Psion.

"The choice of Psion as the OEM

original equipment manufacturer for Ericsson's device should provide a boost to Psion Computing by increasing the production of its Series 5 and providing stronger distribution into markets where Psion has not yet made significant progress, notably the U.S. and Scandanavia," says Ian Burgess, analyst at

Credit Suisse First Boston

. Burgess has a buy rating on the company, and CS First Boston has no investment banking relationship with Psion.

Not content with lifting the mood in its core businesses, Psion also announced good news for its Symbian venture Tuesday by striking up a strategic relationship with Japan's

NTT

(NTT)

DoCoMo subsidiary, the country's leading network operator. Although this deal falls short of a new licensing agreement, it is significant because NTT is the leader in the market and is pivotal in setting the country's trends.

If NTT uses the EPOC system on its third-generation network, then the country's equipment manufacturers may possibly follow suit.

All in all, it's been a good week for Psion: two new ventures to lift the sagging fortunes of its core businesses and a foothold in the lucrative Japanese market for its Symbian venture. But the question remains whether the fortunes of Psion will continue to follow that well-known maxim: What goes up must come down.