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Monday 06 August 2001

Gemplus Operating Loss and Restructuring Program

Gemplus has reported results for the second quarter ended June 30, 2001. Revenue for the second quarter was 252 million Euros, down 8% from the same quarter a year ago. Net loss for the second quarter, including restructuring, was 40 million Euros, or 0.06 Euro per fully diluted share. Net loss for the quarter, excluding restructuring, was 21 million Euros, or 0.03 Euro per diluted share.

"Our second quarter operating results reflect the progress we have made in strategically repositioning the company," said Antonio Perez, president and CEO. "We have adjusted and realigned our resources to exploit the opportunities in the Telecommunications, Financial Services and E-Business Security Applications markets."

The company announced that it had successfully implemented its planned restructuring program. "This is a major step forward to increase our financial competitiveness," added Perez. "This restructuring will reduce headcount by 567 people by the end of 2001 and save the company 40 million Euros in annual expenses, with about 17 million of the savings occurring in the second half of the year." The company noted that it would be taking a 28 million Euro restructuring charge. No social plan was implemented in France.

Perez also noted that the sale of its SkiData operation complements its restructuring programs and would enhance the company's strategic focus. Gemplus announced an agreement to sell Skidata to Kudelski S.A. in June and expects to finalise the transaction shortly.Earlier, the company announced that it had been awarded a major contract with the Target Corporation.

The company indicated that its reported results included a favourable 10 million Euro royalty expense adjustment. "While we achieved our goal of restructuring to improve our cost base and competitiveness, we had to deal with the challenging Telecommunications market and resulting softness in our GSM business," commented Perez. "The impact of the business mix shift from Telecommunications and GSM to Financial Services has been felt in gross margin. However, the underlying rapid growth and significant margin improvement in our Financial Services business are very exciting."

"We expect to maintain our leadership market share in the SIM card market and are encouraged by signs that the excess SIM inventory at operators are coming down," added Perez. The company now believes that the market for GSM SIM cards is around 300 million units which based upon historical correlation implies a total number of mobile handsets shipped by manufacturers this year to be 375-380 million units.

Looking forward, Gemplus indicated that it expects third quarter revenue to grow 7% sequentially with operating losses of about 13-18 million Euros. For the year 2001, the company expects revenue will be flat to down compared to the year 2000 with operating profit, before restructuring, at about 5 million Euros.


Oberthur Selected for Hungary's Home Banking Pilot

Oberthur Card Systems has won a contract to supply Smart Cards, software and readers for the pilot phase of Hungary's Internet Home Banking application. The order was placed by Cardnet, one of the contractors for the project, on behalf of K&H Bank, a leading Hungarian retail bank and MATAV (Hungarian Telecom), K&H Bank's major partner.

Oberthur is to provide 5,000 AuthentIC Smart Cards and ActivCard readers for use within the K&H Bank network as part of a fully operational pilot programme which began in December 2000. The Smart Cards generate digital signatures, which authenticate the user, creating a secure and controlled environment for home banking.

Marc Bertin, Director of e-Business for Oberthur Card Systems said: "This is the first time that Oberthur has supplied PKI technology to an e-business project in Hungary. The solution chosen, AuthentIC, is quite unique in the market, being a true multi-application, EMV compliant, RSA-capable card."


Fargo Technology Alliance

Five more firms have joined the Fargo Technology Alliance (FTA), a global technology group promoting advanced Smart Card solutions. Fargo Electronics announced the new members as: CASI-RUSCO, Boca Raton, Fla.; Leapfrog Smart Products, Maitland, Fla.; Lexington Technology, Huntington Beach, Calif.; Synercard Corp., Quebec, Canada; and Unicard Systems, Sydney, Australia.

"The Fargo Technology Alliance unites Smart Card solutions with Fargo's international and domestic network of distribution partners. With 17 Alliance members now working together with our global distribution system, Fargo is able to provide a wider range of complete solutions for end users," said Gary R. Holland, President and CEO of Fargo.

The other 12 members of the Alliance are: Bull CP8; CardLogix; CardSmart Technologies; Gemplus; IDenticard Systems; ImageWare; Intraproc GmbH; NFive Software; Schlumberger; SmartDynamics; Supercom Smart Cards and UbiQ.


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