Security

The Security segment is characterized by growth and diversification. We are producing an increasing range of software, services and solutions for an ever-expanding number of markets, from governments and their agencies to organizations and enterprises.

Our performance (*)

Revenue

318m

(2009: €236m)

Up 31% year-on-year at constant exchange rates

Gross profit

129m

(2009: €85m)

Gross margin

40.6%

(up 450 basis points)

Profit from operations

39m

(2009: €4m)

Profit margin from operations

12.4%

(up 1,060 basis points)

  • Government Programs revenue was up 16%, on the back of certain large-scale ePassport and eID programs starting their deployment
  • Identity & Access Management revenue was up 50%, thanks to strong sales of eBanking solutions.
  • Productivity gains and scale effect, together with the higher patent contribution, led to 450 basis points gross margin improvement.
  • Operating expenses were down 620 basis points to 28% of revenue.
  • The operational leverage – combination of strong growth, gross margin performance and operating expenses control – lifted profit margin from operations to 12.4% in 2010, and to 6.8% when excluding the patent contribution.
  • (*)
  • Adjusted financial information for ongoing operations.
    For further information see Adjusted measures.

Our products, software and services

Government programs

We provide identity management solutions and services comprising secure documents, enrollment, issuance and national registry solutions for governments, national printers and integrators.

  • Sealys: physical, visual and electronic security for travel documents, national eID, eHealth cards, drivers licenses and registration certificates.
  • Coesys: end-to-end solutions for enrollment, issuance, border control and eGovernment.
  • Allynis: secure operated services, outsourced personalization and delivery, plus strong engineering and financial capabilities.

Identity and Access Management

Online Authentication (OA): We provide strong authentication for enterprises, governments, banks and other organizations, enabling them to control access to their physical and logical assets.

  • Protiva: a full suite of products, software and services to protect information and provide encryption for sensitive data. This includes multi-function smart cards, contact and contactless readers, USB memory with built-in security, One-Time Password devices and Public Key Infrastructure for access control in fixed and mobile environments.
  • Protiva enables customers to implement secure access to and storage of data, secure remote access, digital signature, pre-boot authentication, identity verification and biometric authentication.
  • Our end-to-end services take customer projects from definition to infrastructure integration, fulfillment and ID provisioning.

eBanking and eCommerce: We enable banks and retailers to offer customers in each end-user segment tailored solutions that deliver maximum confidence in their online transactions without compromising convenience.

  • Ezio online banking solutions: digital signature and secure access to home banking, retail and corporate bank networks, eCommerce sites and cloud computing services.
  • Cards, USB tokens, connected and unconnected readers, central servers, plus fulfillment, integration and hosted authentication services.

Licensing of intellectual property rights

We have a unique portfolio of proprietary technology and patents, and we license use of our rights to other players.

Our positioning

  • Governments are increasingly using electronic ID solutions to enhance national security and increase administrative efficiency.
  • Gemalto is the world leader in this domain in terms of the number of ePassport and eID systems implemented, with over 50 active projects.
  • We have unrivalled experience in managing programs involving a wide variety of interactions between citizen and state, and in compliance with regulations for electronic documentation and software.
  • Our global footprint and efficient operations enable us to address market opportunities with a strong local dimension.
  • Gemalto is trusted by governments and financial institutions to protect access to their sensitive data.
  • Our clients include many Fortune 500 companies such as Boeing, Chevron, HP, Schlumberger, Shell, Microsoft and the US Dept. of Defense.
  • We deliver strong access control and help clients meet industry standards and governmental security directives.
  • We provide advanced solutions in fixed and mobile environments, minimizing total cost of ownership and maximizing convenience without compromising security.
  • Our solutions provide the highest level of protection against fraud while being simple for IT departments to administer and very easy to use, ensuring maximum compliance with security protocols.
  • Gemalto is a global leader in eBanking deployments based on EMV-CAP (Chip Authentication Programs).
  • We have delivered some 50 million Ezio units, half of which are advanced unconnected and connectable eBanking card readers.
  • Our worldwide footprint enables us to serve customers locally from design to integration and fulfillment services.
  • With the broadest portfolio on offer, we are chosen by banks facing an increasing diversity of needs, from light, unconnected to major connected solutions over fixed and mobile networks.

Government programs

National security and border integrity continued to dominate headlines around the world during 2010. Many countries are investing heavily in additional security measures to protect against hostile intent – from within and outside their borders – and to enforce policies on travel and access. Meanwhile global interest in, and deployment of, electronic identity solutions for citizens is at an all-time high as governments look for ways to become more efficient and at the same time to enhance the services they offer.

Electronic passports

Gemalto saw steady revenues from ePassports and related services in 2010. The best testament to the strength of our business in this sector is the number of our satisfied customers.

In May, for example, the Norwegian Police renewed its multi-year contract to personalize and issue Sealys ePassports. Gemalto manages the entire delivery process from our secure service center in Oslo, from the production of travel documents through to personalization and issuance services. The new solution features extended access control (EAC) (a high-security mechanism for second generation passports) and includes an innovative data page hinge to prevent fraudulent use.

Elsewhere, in June, we announced that we had been selected by the Turkish Ministry of Foreign Affairs for its ePassport program. Our Coesys issuance solution, including the certificate authority and associated integration services, is being used to personalize new electronic passports for Turkey’s 72.5 million citizens.

In September, the Moroccan Mint commissioned Gemalto to deliver a complete solution for the Kingdom’s new biometric passport program. Our solution includes the highly secure Sealys eTravel operating system; integrated contactless microprocessors containing the holder’s digital data; plus our Coesys Issuance solution, training and maintenance services. We are also supplying the Ministry of the Interior with our Coesys Enrolment solution to ease data capture.

In November, the Danish State Police also renewed its contract for our Sealys ePassport production and issuance service, a five-year deal with an option for a further five. We are also providing our Allynis Issuance services for ePassport personalization at our Danish service center. The document has a secure laser-engraved polycarbonate data-page with innovative features including a contactless microprocessor running our highly secure OS.

To cater for increased global demand for premium products manufactured in a highly-secure environment, in 2010 we opened a new production line for core ePassport technology in Poland. Our additional capabilities in Tczew mean that we can continue to guarantee our customers high quality and excellent service levels.

Electronic IDs and drivers’ licenses

We reached several milestones for our electronic IDs and drivers’ licenses (eID and eDL) business in 2010. For example, in India we surpassed the ten million mark for deliveries of electronic drivers’ licenses and electronic registration certificates for vehicles. The program is expected to become the largest of its kind in the world.

We continued to break new ground for eID in 2010. For example, the Republic of Benin is benefiting from our Coesys enrollment solution to manage the secure biometric registration of an estimated six million voters for its 2011 presidential elections, by using more than 3,200 Coesys mobile enrollment stations.

Gemalto is also supplying the software for national data consolidation, training services, technical assistance and fulfillment. This success reinforces our presence in Africa where we have already deployed several government programs, notably in Algeria, the Ivory Coast, Gabon, Morocco, Tunisia and South Africa.

Health cards

Governments around the world prioritized efficiency in 2010, and Gemalto solutions are helping them manage health administration, a key area of public spending. Electronic Healthcare Records (EHR) are unquestionably the next stage in restructuring the relationship between patients, healthcare practitioners and public-sector authorities. They can help reduce benefit fraud, provide healthcare to the right patients and ensure only authorized people can access their data.

In February 2010, Bulgaria began deploying a national EHR program to optimize, simplify and secure health treatment and information for its military personnel and their families using Gemalto technology and middleware. The personal electronic health record enables healthcare professionals to access a patient’s medical data instantly and make more accurate decisions, especially in emergency situations.

Innovation and awards

A core part of the Gemalto proposition to governments is innovation, helping them to streamline their services and achieve cost-controls. In June, we launched Sealys CoreMark, a semi-transparent opening fused into a 100% polycarbonate card body that is impossible to delaminate. Its distinctive watermark effect is produced by laser engraving deep into the card’s core layers. This new security feature can be applied to documents such as ID cards, health cards, drivers’ licenses, vehicle registration, voting and resident permit cards.

Not all of our innovation is technological. In May, we announced a partnership with The World Bank to support social and economic advancement in developing countries. This collaboration is part of the World Bank’s eTransform Initiative and will see Gemalto’s international experience in secure electronic identity and mobile financial services applied to help governments gain wider access to best-in-class technology, expertise and practices.

It’s always pleasing when our innovative products achieve industry recognition – and awards underpin our business case with government clients, too. In November, our Personal Identity Verification credential was named Best Smart Card Solution at the US Government Security News Homeland Security Awards in Washington DC. Our secure Coesys Enrollment Solution for US ID projects was also a finalist in the Biometric Solutions category.

Online authentication (OA)

In 2010, Gemalto continued to supply solutions to manage access for employees to both physical infrastructure and IT systems in markets such as higher education, government, healthcare, banks and corporations. Our expertise in issuance and personalization ensures that each employee or member is properly accredited; and that authorizations, from the most senior decision-makers to the freshest recruits, can be managed centrally for maximum efficiency.

Partnerships with leading IT suppliers ensure our solutions are easy for corporate IT departments to deploy and easy for their employees to use. For example, our Protiva .NET Bio solution, available for Windows 7, is delivering increased levels of corporate security by applying multi-factor authentication with biometrics on the smart card. Microsoft itself manages physical and logical access control worldwide using our smart cards with .NET technology.

OA for governments

Gemalto’s extensive government contracts for electronic authentication demonstrate our ability to deliver the highest levels of security for all our potential customers. Their systems hold highly personal information about millions of people. Their employees are often engaged on work of great sensitivity. And reliability is paramount – both to protect data and ensure key staff can access secure information and networks wherever they are in the world. So our enterprise and banking customers can be reassured that our solutions have been tested in the most secure environments.

In January 2010 we announced that Australia’s Queensland Police Service had selected Gemalto to provide new electronic ID cards for its staff. This is the first police force to adopt an innovative solution that strengthens access security and enhances operational management.

OA in financial services

The most valuable assets for financial services firms today aren’t held in vaults or safes – they’re in databases, and in their employees’ ability to perform secure transactions without delay. Banks can secure vital data and premises with world-class encryption systems using Gemalto smart cards, while ensuring the right employees have access to both physical infrastructure and IT systems.

The Financial Services sector is a fast-moving market, and in 2010 we continued to innovate with products tailor-made for its most testing environments. In December, for instance, we launched a specific strong authentication solution for traders: Protiva One4all. With it, each trader only needs one secure credential to perform logon, logout and desktop locking for multiple PCs. This stand-alone software is designed to work with any PKI smart card and middleware. It can be easily installed on workstations with no impact on a bank’s existing IT systems, and has been implemented in the trading rooms of major banks worldwide.

Securing education

Higher education is a showcase for our authentication solutions. On any campus, thousands of staff, students and support workers need secure access to buildings, networks, banking, transportation, and even for voting in student elections. Our multi-function cards act as a single credential allowing them to access a uniquely tailored set of services. The user-friendliness of our solutions is a key asset for fast adoption and deployment. In 2010, more than seven million students around the world used our eID solutions.

Cloud computing

As companies strive to meet the demands of their mobile workforces, cloud computing has become the focus of IT departments looking to deliver data services from a centralized location. One of the significant challenges in this service delivery model is the need for strong security controls and an audit trail of all access events.

Gemalto’s Protiva suite of strong authentication products and services provides a flexible solution to meet the needs of any size of organization. This includes both on-premise authentication, a blend of on-premise and hosted, and a fully hosted authentication service including fulfillment, life-cycle management, authentication services and support. These services are also applicable to the emerging needs within online gaming communities where users need to secure access to their accounts and control their digital assets.

For example, Amazon Web Services (AWS) offers Gemalto’s OTP token to add strong authentication for their users to access their online data resources. Gemalto provides the fulfillment services and manages the webstore where tokens can be bought by AWS users.

eBanking and eCommerce

The drive to move financial services online continued in 2010. Rapidly increasing use of smartphones and the need for banks to offer customers both convenience and security – as well as improve their own efficiency at a time when they remain under financial pressure – meant electronic banking activity reached record levels.

Gemalto is the only truly global eBanking authentication provider with a strong local presence worldwide. Our solutions allow people to seamlessly prove their identity and conveniently conduct transactions online, with their privacy respected and secure from fraud. We also recognize that online security is increasingly about people and behavior, not just technology. That’s why banks continued to rely on us in 2010 to deliver the most appropriate strong authentication solution to each individual.

Pushing boundaries

Banks are looking to Gemalto for even stronger, more trustworthy options for multi-factor authentication. That’s why we offer a full range of solutions that add context, establish consent and manage risk. It’s also why we offer a range of services from consultancy and back-end authentication servers, to producing, personalizing and distributing security devices.

This has translated into a number of contract wins. In January 2010, for example, we announced that the Advanced Bank of Asia (ABA) in Cambodia would deploy our Ezio card readers for its new internet banking services. It means ABA customers can securely access and perform online banking transactions using their Ezio Reader and EMV card. This combination of “something you have” (the card) and “something you know” (the one-time PIN) provides a much higher level of security compared with simple username and password schemes.

Alongside our existing innovations we have sought to complement our eBanking offer through acquisitions. At the end of 2009 we acquired the banking business unit of Xiring, and its rapid integration saw us strengthening our position as a global leader in eBanking, eCommerce and access security.

Then in April 2010 we acquired Todos AB, a provider of strong authentication for internet banking that has delivered more than 20 million devices to over 100 financial institutions worldwide. Its product suite allows consumers to use their PIN to securely sign internet banking transactions. Todos was quickly integrated with our existing activities and is a perfect fit with our eBanking business.

"Gemalto’s Ezio Suite brings together a unique authentication server, plug-in modules and a range of authentication devices, ensuring our customers get exactly the solution they need."

Strong authentication

Gemalto’s Ezio Suite brings together a unique authentication server, plug-in modules and a range of authentication devices, ensuring our customers get exactly the solution they need. The result is a completely flexible, future-proof system. In November 2010 we augmented Ezio with the industry’s first credit card combining One-Time Password (OTP) security with standard payment. End-users are happy to have a security token embedded in a familiar form-factor, guaranteeing high acceptance – and allowing banks to lower fullfilment costs while increasing security, particularly online.

This kind of innovation helps us win new business. For example, in October, Consultoría International Banco (CI Banco) in Mexico announced the roll-out of our Ezio strong authentication server and OTP tokens, enabling it to deploy multiple authentication devices, including EMV payment cards, connected readers and mobile phones. Leading banks such as Barclays, ABN AMRO, Nordea and many of their peers around the globe continued to trust us last year to deliver more than 50 million eBanking security devices to the doorsteps of their clients.

peoplepics-security-2

10 million

Electronic drivers’ licenses delivered to date in India

100 million+

Electronic documents issued to date by Gemalto

eGovernment 2.0

The expression “eGovernment”, which has been current for some years, refers to the use of information and communication technology in government services.

More recently, “eGovernment 2.0” (or eGov 2.0), was coined to describe programs offering even more effective delivery of these services. The most common goals of eGov 2.0 programs are increased efficiency, lowered costs and reduction in bureaucracy. They also include modernization of the social contract and strengthening of social cohesion.

For Gemalto, eGov 2.0 means a resolutely citizen-centric approach to the delivery of public services, making them more intimate and personalized. We enable this through programs using our secure electronic identification technologies. By offering an increasing range of flexible, responsive and convenient solutions, the public face of government is progressively growing closer to the citizens it is serving.