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GEMPLUS REDUCES EXPECTATIONS FOR 2001
Lower SIM card revenue expected due to wireless market slowdown
Luxembourg, June 6, 2001 - Gemplus International S.A. (Euronext: Sicovam 5768 and NASDAQ:GEMP) today announced that results for its second quarter and fiscal year would be lower than previously expected. The company indicated that due to a slowdown in GSM subscriber growth and inventory issues at operators, it was reducing its expectations for the quarter and remainder of the year. The company now expects revenue for the second quarter to be approximately 265 million Euro, which would be down 4% from the same quarter a year ago. Operating loss for the quarter, excluding restructuring charges, is expected to be 10-15 million Euro. For the full year, the company expects revenue to be 1,225 to 1,265 million Euro, or 2-5 % growth from FY2000 levels with operating profit, before restructuring charges, between 5 and 35 million Euro.
"All our businesses are doing extremely well except for the wireless segment of our Telecommunications division. We are experiencing a softening in SIM card demand due to a slowdown in GSM subscriber growth and inventory issues at operators," said Antonio Perez, president and chief executive officer, "The wireless segment is approximately 50% of our business and therefore significantly impacts our total company performance. We believe this is an industry-wide phenomenon and that we are, in fact, maintaining if not gaining market share."
The company indicated that it was experiencing softer SIM card demand, particularly in Asia. The company also stated that it was receiving weaker purchasing forecasts for the balance of the year from several of its large wireless operator customers. "There are two factors at work here," continued Perez, "First, we believe that GSM subscriber growth has slowed. This is consistent with a number of recent announcements made by several handset manufacturers, component suppliers and market analysts about growth in the GSM market. Second, many operators have large inventories, which are taking longer to work through given the slower growth."
Using statistical analysis of SIM card sales performance versus GSM handset sales figures over the last 2 years, Gemplus showed that there is a high correlation between company SIM shipments and the growth in GSM handsets. As new GSM handset sales have slowed, so too have SIM card sales. Based on discussions with operators, the company now believes that the market for global handsets will be about 400 million units, the market for GSM handsets will be approximately 240 million units (assuming 60% GSM share) and using a multiplier of 1.35 (the historical relation between SIM cards and handsets), the market for SIM cards will be approximately 324 million units. Because Gemplus expects to maintain, and possibly increase, its 42% market share in SIM cards sales, this implies that the company expects to ship approximately 136 million SIM cards during 2001. The revised guidance reflects the reduced SIM card forecast and the expectation of some price pressure in the second half of 2001, although this has not been experienced to date.
Turning to inventory levels, Gemplus stated that, after recent discussions and some physical inventories conducted at some of its key customers, it now believes that the inventory overhang may last into the fourth quarter. The company announced that it has begun to implement a series of operator-specific inventory management programs to improve its visibility going forward.
In closing, the company reiterated that its revised guidance for 2001 is due to a temporary slowdown in the GSM market, which is creating SIM inventory issues at its customers. The company noted that it had already taken the appropriate short-term actions such as implementing strict hiring, travel and spending controls to deal with the current business climate. It was also making the appropriate long-term adjustments to the cost structure and business model to better position the company for the future. Moreover, Perez said, "We feel very good about the many long-term growth opportunities in the wireless industry. And, the success we are experiencing in Financial Services reinforces our belief that it too will become a substantial contributor to our growth in the future."
The company has announced that a conference call has been scheduled for Thursday, June 7, 2001, starting at 2:00 p.m. (CET). Investors can listen to the live conference call on the Internet at www.streetfusion.com or by dialing:
Europe: 44 (0) 20 8781 0562
North America: 1 800 966 6338
Investors are advised that a presentation that will be used during the conference call will be available at www.gemplus.com/investors approximately 2 hours prior to the conference call. The company suggests that listeners download the presentation prior to joining the conference call.
A replay of the conference call will be available approximately two hours after the call on the Internet at www.streetfusion.com and by telephone until June 21, 2001. The replay telephone number and access code are:
Worldwide: 44 (0) 20 8288 4459
Access Code: 619192
About Gemplus
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GEMPLUS: the world's leading smart card solutions provider
Since its creation in 1988, Gemplus International S.A. (Euronext: Sicovam 5768 and NASDAQ:GEMP) has driven the global marketing and deployment of smart card-based applications for telecommunications, financial services and e-business security.
Gemplus is instrumental throughout the value chain - chip design, card management systems, software development, and consulting - delivering integrated custom-made solutions for the security, personalization and privacy management needs of clients and partners worldwide.
Gemplus technology has played a defining role in the development of wireless telephony since the introduction of SIM cards into the GSM standard in 1990. For more than a decade, Gemplus has pioneered applications that enable network operators around the world to answer the changing needs of their customers. Gemplus was first to market with a 3G card and supplies a product range compliant with new and emerging transmission standards - 2.5G, 3G.
In 2000, revenue was 1.205 BE, up 57% from the previous year's 767ME. Net income was 99 ME. Gemplus employs more than 7800 people in 37 countries worldwide. Since 11 December 2000, Gemplus shares have been trading on Euronext Paris S.A. First Market and on Nasdaq in the form of ADSs.
Gemplus: www.gemplus.com
Press contacts
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Press
Gemplus
Séverine Percetti
Tel 33 4 42 36 67 67
severine.percetti@gemplus.com
Gavin Anderson & Co
Anne-Charlotte Toesca
Tel : 01 53 83 31 74
ctoesca@gavinanderson.fr
Investor Relations
Gemplus
Michael Look
Tel : 00 1 650 654 2940
michael.look@gemplus.com
French Retail Investors
Gavin Anderson & Co
Rozenne Pivet
Tel : 01 53 83 31 75
rpivet@gavinanderson.fr
Claire-Valérie Guillen
Tel. : 01 53 83 31 76
cvguillen@gavinanderson.fr
Some of the statements contained in this release or our conference call of June 7, 2001 constitute forward-looking statements within the meaning of Section 27a of the Securities Act of 1933 and Section 21e of the Securities Exchange Act of 1934. The statements relate to the future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to materially differ from any future results, levels of activities, performance, or achievements expressed or implied by such forward-looking statements. Actual events or results may differ materially. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Factors that could cause actual results to differ materially from those estimated by the forward-looking statements contained in this release or our conference call include, but are not limited to: trends in wireless communication and financial services markets and trends in the growth of mobile commerce, mobile banking and internet business; our ability to develop and market new chip card technologies to meet market demands and the effects of the adoption of competing technologies in our target markets, particularly in the telecommunications industry and expected intense competition generally in our main markets; profitability of our market expansion strategy; challenges to or loss of our intellectual property rights regarding chip card technologies; our ability to establish and maintain strategic relationships in our major businesses (i.e. with wireless network operators, financial service providers, internet business infrastructure providers and security technology developers); our ability to develop and take advantage of new software and services; the effect of future acquisitions and investments on our share price; the effect of industry wide chip shortages; defects in our products or errors in our services and our ability to attract and maintain qualified executives and personnel, particularly in our research and development division. You are cautioned not to place undue reliance on the forward-looking statements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of such forward-looking statements. The forward-looking statements contained in this release speak only as of this release. We are under no duty to update any of the forward-looking statements after this date to conform such statements to actual results or to reflect the occurrence of anticipated results.
©2001 Gemplus All rights reserved. Gemplus,
the Gemplus logo and GemSense are trademarks and service marks of Gemplus
S.A. and are registered in certain countries. All other trademarks and
service marks, whether registered or not in specific countries, are the
property of their respective owners.
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