Gemplus reports second quarter 2002 financial results

• Strong sequential revenue growth with improved margin
• Restructuring delivering more than expected
• On track for profitability in Q4 2002
• Non-cash write-down of a director's loan

Luxembourg - July 31, 2002 - Gemplus International S.A. (Paris Euronext: Euroclear 5768 and Nasdaq: GEMP), the world's leading provider of smart card-enabled solutions, today reported results for fiscal year 2002 second quarter ended 30 June, 2002.

Financial Statements for the second quarter 2002 (100K)

Compared with the first quarter, revenue was up 19% to 209.8 million euros, and gross profit was up 34% to 48.4 million euros, a 2.6 percentage point improvement, reflecting a combination of an improved sales mix and new lower cost chip inventory more than offsetting pressure on selling prices. Operating expenses were down 13% to 72.6 million euros, beginning to show the first impacts of this year's restructuring programme. The operating loss for the quarter was 24.2 million euros pre-restructuring charge, almost half the first quarter level. A restructuring charge of 43.1 million euros was taken as expected. Including a positive tax variance of 18.1 million euros, the net loss after interest and other income, but before a non-cash write down, was 48.9 million euros and 56.1 after amortisation of goodwill. Taking into account the non-cash write down of a director loan, the net loss was 115.8 million euros and 123.1 million euros after amortisation of goodwill. Net loss per share was 0.20 euros and 0.02 euros excluding the exceptional items for the restructuring charge and the provision for the director's loan.

Cash and cash equivalents remain strong at 412 million euros and net cash used during the quarter was 38.3 million euros. Working capital management produced further improvements with inventory levels down 16% against the first quarter, representing 71 days supply compared to 94 at the end of Q1 and 135 at the end of June last year. Day sales outstanding were 53, compared to 63 at the end of Q1 and 75 at the end of June last year.

Ron Mackintosh, Interim Chief Executive Officer, said:
"These results show good progress towards our immediate goal of restoring Gemplus to profitability. We are reasonably confident that we shall achieve this in the fourth quarter of this year."

"As important, we have also made good progress in our planning for the next stages of Gemplus' development towards our goal of becoming a low cost producer and to position Gemplus both to benefit from new areas of smart card growth and to move up the margin chain in our existing core markets of telecoms and financial services. Our task is now to refine and then implement these plans."

"There is much still to be done, we operate in an highly competitive marketplace and the economic environment is not helpful. Nevertheless, Gemplus can have pride in its operating achievements this year to date and confidence in its potential."

Restructuring Up-date
The restructuring programmes announced in February are fully on track. Their positive impact has begun to be seen in the second quarter results, during which they contributed 10.9 million euros of the reduced operating costs, split equally between reduction in the number of employees and other cost reduction.

To date, some 67 million euros of the initially targeted savings have been secured on an annualised basis, and Gemplus is confident of achieving the balance. This will bring total annualised savings achieved by year end to some 110 million euros and the total restructuring charge to around 67 million euros.

In addition, planning on business re-engineering programmes is advanced with a view to completing planning and commencing programme execution by this year end. It is considered that these further programmes should achieve cost reduction and efficiency gains which will help us attain our objective of being a low cost producer.

Write-down of loan to a Board Director
Upon the advice of its external auditors, the Company has decided to include in its consolidated accounts for the second quarter ended June 30, 2002 a provision to cover the risk of possible non-reimbursement of a loan granted to Dr Marc Lassus, former Chairman and a current Board member, by one of its indirect subsidiaries in 2000. This provision, which has no impact either on the operating income or on the cash position of the Company, amounts to 66.9 million euros. By taking this provision the Company is obviously not indicating any forgiveness of the loan. The Company expects to be fully reimbursed by Dr Lassus. The Board has established a special committee to examine the appropriate actions in relation to this situation. The committee will be the Chairman, the Vice Chairman and the Company's General Counsel. The committee will make a recommendation to the Board by August 31.

Management
Mr Ron Mackintosh has decided to step down as Interim Chief Executive Officer on August 15. Mr Mackintosh will continue to serve as a non-executive director. The Board will make an announcement on his successor prior to August 15.

Ron Mackintosh, said:
"I believe I have done the job I came to Gemplus to do. The business is performing as planned and is well advanced on its longer term objective as well as fully confident of achieving its short-term goals. Gemplus knows where it's heading and how to get there.

Dominique Vignon, Chairman, said:
"Ron has done a first class job and the Board and the business are deeply appreciative and wish him all the very best in the next stages of his distinguished career. We are also delighted he will be retaining continuity with Gemplus by continuing as a director.

"For all the issues Gemplus obviously faces, make no mistake that Gemplus is a leading force in the smart card industry. The company has made strong progress this year and has the capacity, capability and strong commitment to be a profitable winner in the growing smart card market worldwide. Gemplus' foundations run deep and I am proud and privileged to be its Chairman."

Conference Call:

The company has scheduled a conference call for Wednesday, 31 July 2002 starting at 2.00pm Paris time.
Callers may participate in the live conference call by dialling:

Europe: +44 (0) 20 7984 7582
North America: +1 (913) 981 5517

Access Code: 209401

The live conference call will also be available on the Internet at www.companyboardroom.com.

Replays of the conference call will be available approximately two hours after the conclusion of the live conference call for five days on: +44 (0) 20 7984 7578 (Europe) or +1 (719) 457 0820 (US). Access Code: 209401.

Enquiries :

Media
Gemplus:
Martin Crocker
Tel.: +33 4 42 36 30 46
Email: martin.crocker@gemplus.com

Citigate Dewe Rogerson: Tel.: +44 (0) 207 638 9571
Anthony Carlisle Tel.: +44 (0) 797 361 1888
Email: anthony.carlisle@citigatedr.co.uk

Laure Lagrange Tel.: +44 (0) 207 282 2988
Mobile: +44 (0) 776 869 8731
Email: laure.lagrange@citigatedr.co.uk

Investor Relations
Gemplus:
Yves Guillaumot Tel.: +33 4 42 36 52 98
Email: yves.guillaumot@gemplus.com

Fineo:
Anne Guimard Tel.: +33 1 45 72 20 96
Email: guimard@fineo.com

Some of the statements contained in this release constitute forward-looking statements. These statements relate to 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 be materially different 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 include, but are not limited to: trends in wireless communication and mobile commerce markets; our ability to develop new technology, and the effects of competing technologies developed and expected intense competition generally in our main markets; profitability of our expansion strategy; challenges to or loss of our intellectual property rights; our ability to establish and maintain strategic relationships in our major businesses; our ability to develop and take advantage of new software and services; and the effect of future acquisitions and investments on our share price. 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.

©2002 Gemplus International S.A. All rights reserved. Gemplus, the Gemplus logo, GemXpresso, and Your Passport to the Digital Age 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.