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Gemplus Anticipates Lower Sales and Net Earnings IN Q3 and full year 2001
Luxembourg (September 27th, 2001) - Gemplus International S.A (Euronext: Sicovam 5768 and NASDAQ: GEMP), the leading provider of solutions empowered by smart cards, announced today that the company anticipates it will report reduced net sales and net earnings for its third quarter ending September 30, 2001.
Reasons for the reduction include soft demand for GSM SIM modules, customer requested project delays in its Financial Services Business and the unfavorable currency effects of a weakening US Dollar.
The company said that it now expects Q3 revenue to finish in the 225-235 million Euros range, with operating profit to finish at a 30-37 million Euros loss. Adjusted for the divestitures of Skidata and the Tags business which occurred during the third quarter, the revised third quarter guidance was for revenues of 259 million Euros and an operating loss between 11 and 17 million Euros.
The company said that there is no indication that GSM SIM module demand would improve much in the next quarter. As a result, the Q4 is also going to be softer than expectations.
GSM SIM module demand to show little improvement in the short term
"In the past two weeks, we have seen a rapid deterioration in our revenue prospects for the third and fourth quarter" said Antonio Perez, President and CEO of Gemplus International S.A. He added that, while he was quite optimistic about the mid-to-long term prospects for the GSM SIM modules, he felt the short term would be "very challenging."
Financial Services Business to be impacted by US customer initiated requests to delay shipments
Perez said that the company was also analyzing the preliminary implications that recent world events would have on demand, particularly in the US market.
In its Financial Services Business, the company noted that as a result of the global economic uncertainties, it has received several customer initiated requests to delay shipments.
However, Perez stated that he was confident that the revenue associated with the projects delayed in Q3 would be recognized in Q4.
Unfavorable impact of weaker dollar on revenue performance
In addition, the economic slowdown in the US is creating a weaker US Dollar, which in turn is having an unfavorable impact on the company's revenue performance and operating profit. Much of the revenue that the company generates in Southeast Asia is dollar denominated. Gemplus currently estimates that the currency effect could contribute as much as 8 million Euros unfavorable impact to the operating profit. This amount represents about 40% of the shortfall in operating profit. Perez noted that "fortunately, about half of this effect will be offset by the company's hedging program and will be reported in other income".
Positive effect of tight cost control to dampen impact of difficult business conditions
Finally, Perez highlighted the solid progress the company had made with hiring and expense controls. These controls were established late last year and are accomplishing their intended purpose. He said that these controls would remain in place until the business situation improved.
The company noted that it would not be providing specific guidance for the fourth quarter nor for FY2001 at this time. "Obviously, given the situation in our specific markets and adding the uncertainty in the world economic environment, our visibility looking forward is not at the confidence level we require to provide meaningful guidance and set performance expectations", concluded Perez. The company will communicate performance guidance when it is confident enough that the visibility will have improved and the economic environment stabilized.
The Company intends to report its actual third quarter financial results on November 6, 2001.
The company will hold a conference call on Thursday 27 September 2001 starting at:
8 am New York
2 pm Paris
1 pm London
Investors can listen to the live conference call on the Internet at www.streetfusion.com or by dialing:
Europe: 44 (0) 208 781 0574
North America: 1 800 966 6338
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 October 4, 2001. The replay telephone number and access code are:
Worldwide: 44 (0) 208 288 4459
Access Code: 624312
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Contacts
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
Fineo
Anne Guimard
Tel : 00 33 1 45 72 20 96
guimard@fineo.com
French Retail Investors
Hotline
0800 611 611
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.
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About Gemplus
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 Card 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 Nasdaq Stock Market® 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
www.gemplus.com
©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
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property of their respective owners.
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