Gemplus International S.A. reported results for the third quarter ended
September 30, 2001.
Revenue for the third quarter was 226 million Euros, which is down 27% from
same quarter a year ago, and down 10% compared to the second quarter 2001.
Telecommunications declined 37% from year ago levels and accounted for 64% of
group revenues. Network Systems grew 22% and accounted for 24% of group
revenues. Excluding the SkiData business, which was divested during the
quarter, Network Systems grew 44% over the third quarter of last year. Other
revenue, which consists of Plastic Magnetic Striped Cards, Contactless Cards
and TAG declined.
Operating loss was 55.3 million Euros, compared with an operating profit of 32
million Euros for the same quarter a year ago. Excluding the 18.1 million Euro
charge for the Humetrix lawsuit, the operating loss was 37.2 million Euros.
Net income for the third quarter was 6.6 million Euros, or 0.01 Euro per fully
diluted share. Net income includes a combined after tax capital gain of 58.4
million Euros from the divestitures of SkiData and the TAGs business as
an 18.1 million Euro charge for the Humetrix lawsuit. Net loss for the
excluding these exceptional items, was 29.7 million Euros, or a 0.05 Euro loss
per diluted share.
According to the company, the third quarter results reflect three key themes:
the unfavorable impact of the continuing weak SIM market, a substantial
reduction in the level of operating expenses, and encouraging mid-to-long term
prospects strengthened by recent developments in both its Telecommunications
and Financial Services businesses.
“Early signs that the SIM card market may be stabilizing encourage us,” said
Antonio Perez, President and CEO. “This is an extremely important segment for
Gemplus. We are also pleased with the continued progress of our Financial
Services business, although we are watching the US economy very closely.
Furthermore, the recent heightened interest in Security and National ID cards
could be a major growth engine for us over the intermediate and longer term.”
He noted, however, “Business conditions in our specific markets and the added
uncertainty in the world economic environment make it too difficult to provide
meaningful guidance for the fourth quarter or for 2002.”
Stabilizing GSM SIM card business, continued progress of Financial
Services, strong performance of the Americas.
The company noted that it is seeing early indications of stabilization in the
GSM SIM market. The company also expects operator inventory levels to be in
balance with end user demand at the end of the year. While this is unlikely to
cause a dramatic increase in GSM SIM card orders this fourth quarter, this can
be viewed as a positive development for 2002.
Regional growth rates were down across all geographies with the exception of
the Americas region, where the 32% increase in revenue was fueled by progress
in the Financial Services multi-application (MAP) card business.
Despite the delay of some shipments into the fourth quarter, as we anticipated
in our September 27 announcement, the Financial Services multi-application
(MAP) business still grew 44%. Although the weakening US economy could further
impact growth rates, Gemplus continues to believe that it is gaining market
share in the very important U.S. market.
Substantial improvement in operating expenses and asset
The actions taken this year to improve financial competitiveness and enhance
strategic corporate focus enabled the company to reduce operating expenses by
15% from the second quarter. This is the lowest level of expenses since Q3 of
last year. Perez stressed, “In addition to the divestiture of the SkiData and
TAG businesses, earlier this year, the continuing implementation of the
restructuring program is well on its way to achieving our 40 million Euros in
annual cost savings objective.”
Furthermore, inventory levels declined 21% during the quarter, as shipments
exceeded receipt of material and as a result of the SkiData divestiture.
Accounts Receivable Days Sales Outstanding (DSO) also declined. The company
finished the third quarter with a 503 million Euro cash balance. Perez noted,
“A full-fledged competitive advantage in itself, our strong cash position
provides enormous flexibility during challenging market environments such as
Encouraging mid-to-long term prospects strengthened by recent
developments in both the Telecommunications and Financial
Perez cited plans by two major US mobile operators to offer GSM and GPRS
service in the U.S. “These developments combined with recent indications that
GPRS service will be available in several regions of the world by mid-2002
signal a potential return to much healthier SIM card sales growth rates next
year. Furthermore, our MAP business continues to grow, particularly in the
In closing, Perez stated, “With this as a backdrop, we have been able to
our level of operating expenses, improve our asset performance and enhance our
strategic focus. These combined actions should help us speed our return to
profitability as the market improves.”
GEMPLUS: the world’s number one provider of solutions empowered by Smart Cards
(Gartner Dataquest 2001).
Gemplus helps its clients offer an exceptional range of portable, personalized
solutions that bring security and convenience to people’s lives. These include
mobile Internet access, inter-operable banking facilities, e-commerce and a
wealth of other applications.
Gemplus is the only completely dedicated, truly global player in the Smart
industry, with the largest R&D team, unrivalled experience, and an outstanding
track record of technological innovation.
Gemplus trades its shares on Euronext Paris S.A. First Market and on the
Stock Market(R) as GEMP in the form of ADSs. Its revenue in 2000 was 1.205
billion Euros. It employs 7800 people in 37 countries throughout the world.
Gemplus: Your Passport to the Digital Age