Gemplus SA

Gemplus Reports Strong Third Quarter 2005 Results

    Luxembourg (ots/PRNewswire) -

    - Operating Margin Well on Track to Reach 2007 10% Target

LUXEMBOURG, October 26 /PRNewswire/ --

    - Third Quarter 2005 Highlights:

    - Substantial improvement in operating margin, to 8.6%.

    - Robust growth in all core businesses: net sales up 15.5% year-on-year (incl. Setec).

    - Strong increase in attributable net income, to 20.9 million euros.

    - Solid free cash flow of 28.2 million euros, excluding non-recurring items.

LUXEMBOURG, October 26 /PRNewswire/ --

    Gemplus International S.A. (Euronext: LU0121706294 - GEM and NASDAQ: GEMP), the world's leading provider of smart card solutions, today reported results for the third quarter ended September 30, 2005.

@@start.t1@@      In millions of euros                            Q3 2005 Q3 2004    Year-on-year
                                                                                                    change
      Net sales                                                247.9    214.7          +15.5%
      Adjusted for currency fluctuations,                                        +7.5%
      disposals and acquisitions
      Gross profit                                          82.8      64.0            +29.4%
      Gross margin                                          33.4%    29.8%         +3.6 ppts
      Operating expenses                                 61.5      64.1              -4.1%
      Operating income                                    21.3      -0.2                NM
      Operating margin                                    8.6%      -0.1%         +8.7 ppts
      Attributable net income                         20.9      -8.5                NM
      Free cash flow excluding                        28.2      12.2            +131.6%
      non-recurring items(1)
      Cash and cash equivalents                      400.8    389.2            +3.0%
                                          Per share data (in euros)
      Earnings per share (fully diluted)        0.03      -0.01              NM@@end@@

    Commenting on the performance for the third quarter 2005, Alex Mandl, President and Chief Executive Officer, said: "This was the tenth consecutive quarter of continuous strong progress for Gemplus. The top line grew at 15%, with robust growth in all core businesses. Year-to-date operating income grew fivefold. With an operating margin of 8.6% for the third quarter 2005, our 2007 target of 10% is clearly within our reach. Moreover, our quantum-leap technology, GemXplore Generations, is receiving strong customer response. We therefore continue to be very optimistic about the long-term growth prospects for our Group."

    Third quarter 2005 financial review

    - Income statement

    Third quarter 2005 highlights:

    - Robust growth led by the Americas and EMEA(2): +15.5%.

    - Continuous progress in gross margin: 33.4%, up 3.6 percentage points year-on-year.

    - Substantial increase in operating margin, to 8.6%.

    - Strong increase in attributable net income, to 20.9 million euros.

    Net sales rose 15.5% year-on-year, reflecting strong growth in all core businesses and the consolidation of Setec. Adjusted for currency fluctuations, disposals and acquisitions, revenue was up 7.5%.

    On a geographical basis, Wireless drove a 36.5% year-on-year growth in revenue in the Americas, after adjusting for currency fluctuations, acquisitions and disposals. In EMEA, adjusted(3) net sales increased by 1.9%, year-on-year, and were down 13.7% in Asia.

    Gross margin was up 3.6 percentage points year-on-year, to 33.4%. This was driven by strong improvement in Wireless and a more favorable business mix.

    Operating expenses(4) decreased 4.1% year-on-year to 61.5 million euros,  even with the consolidation of Setec.

    Operating income grew substantially to 21.3 million euros, leading to an operating margin of 8.6%.

    Foreign exchange losses, mainly related to cost of hedging, were fully compensated by net capital gains on equity investments.

    Attributable net income is 20.9 million euros, i.e. a 29.4 million euros increase year-on-year.

    - Balance sheet and cash flow statement

    Third quarter 2005 highlights:

    - Solid free cash flow of 28.2 million euros, excluding non-recurring items.

    - Strong cash position improved, to 400.8 million euros.

    Compared to June 30, 2005, cash is up 27.3 million euros, reflecting  profitability improvement and sound management of working capital.

    Segment analysis

    - Telecom

    Third quarter 2005 highlights:

    - Record sales in Wireless: shipments up 43% year-on-year, to 87.6 million units.

    - Rapid development of 3G in Europe.

    - Sustained Wireless gross margin above 40%.

    - Substantial improvement in operating margin: up 2.4 percentage points to 15.1%.

@@start.t2@@      In millions of euros                          Q3 2005 Q3 2004 % change    Adjusted
                                                                                                            Growth(3)
                                                                                                                 (%)
      Wireless products & services net sales    154.0    131.1    +17.5%
      Wireless gross profit                                62.3      50.3      +23.9%
      Wireless gross margin                                40.4%    38.3%  +2.1 ppts
      Prepaid phone cards & scratchcards net    13.5      22.1      -39.0%
      sales
      Prepaid phone cards & scratchcards            0.9        1.4      -35.1%
      gross profit
      Prepaid phone cards & scratchcards          6.7%      6.3%    +0.4 ppt
      gross margin
      Telecom net sales                                      167.5    153.2      +9.3%      +7.3%
      Telecom gross profit                                 63.2      51.7      +22.3%
      Telecom gross margin                                 37.7%    33.7%  +4.0 ppts
      Telecom operating expenses                        37.9      32.3      +17.6%
      As a % of sales                                         22.6%    21.0%  +1.6 ppt
      Telecom operating income                          25.3      19.4      +30.2%
      Operating margin                                        15.1%    12.7%  +2.4 ppt@@end@@

LUXEMBOURG, October 26 /PRNewswire/ --

    Wireless continued to enjoy strong growth:

    - Currency adjusted revenue increased 17.6% year-on-year.

    - Shipments rose 43% year-on-year to 87.6 million units, reflecting strong sales notably in the Americas and EMEA.

    - Product mix continued to improve: the share of high-end card shipments rose significantly year-on-year, accounting for 47% of the total in the third quarter 2005, compared with 30% a year ago.

    - Average selling price (ASP) was down 19.4% year-on-year and 2.4% quarter-on-quarter, both currency adjusted.

    Wireless gross margin improved 2.1 percentage points year-on-year, led by stronger volume, favorable product and regional mix, lower chip purchasing prices and improved manufacturing efficiency, offsetting ongoing price pressure. Combined with a more profitable business mix, this drove a 4.0 percentage point improvement in Telecom gross margin.

    Operating expenses rose 4%, excluding the release of a 4.1 million euros restructuring provision a year ago.

    Operating income increased 30% and operating margin was up 2.4 percentage points, to 15.1%.

    - Financial Services

    Third quarter 2005 highlights:

    - Accelerated EMV(5) deployment in Continental Europe.

    - Positive operating income.

@@start.t3@@      In millions of euros                    Q3 2005 Q3 2004  % change    Adjusted(3)
                                                                                                        change (%)
      Net sales                                        58.9      53.0        +11.1%         +1.2%
      Gross profit                                  13.7      10.1        +36.2%
      Gross margin as a % of sales         23.3%    19.0%  +4.3 ppts
      Operating expenses                         13.1      24.9        -47.4%
      As a % of sales                              22.2%    46.9%  -24.7 ppts
      Operating income                              0.6      -14.8         NM
      Operating margin as a % of sales  1.1%    -27.9%         NM@@end@@

    Net sales were up 11% primarily driven by the consolidation of Setec. Payment microprocessor cards continued to see favorable momentum in the third quarter 2005, driven by sustained activity in EMV deployment across all regions. However, a one-time customer renewal program in the UK in the third quarter 2004, led to a modest year-on-year adjusted growth rate.

    This quarter saw an acceleration of EMV deployment in Continental Europe and of EMV shipments to Japan.

    In total, Gemplus shipped 22.1 million units of payment microprocessor cards, up 30% year-on-year. Payment microprocessor card revenue was up 12% year-on-year. The decline in ASP was led by a higher share of modules in the sales mix.

    Operating expenses for the third quarter 2004 included 14.1 million euros for restructuring and goodwill amortisation. Therefore, excluding Setec, the one-time cost for the closure of an office, restructuring and goodwill amortisation, operating expenses for the third quarter 2005 were stable year-on-year.

    - Identity and Security

    Third quarter 2005 highlights:

    - Revenue more than doubled year-on-year, reflecting the consolidation of Setec.

    - Strong organic revenue growth3: +51.2%

    - First shipments of e-passport datapages to be issued in Norway and Sweden, the first two countries in the world to issue mandatory e-passports nationwide.

@@start.t4@@      In millions of euros                    Q3 2005 Q3 2004  % change    Adjusted(3)
                                                                                                        change (%)
      Net sales                                        21.5        8.5      +154.5%        +51.2%
      Gross profit                                    5.9        2.2      +162.5%
      Gross margin as a % of sales         27.4%    26.6%    +0.8 ppt
      Operating expenses                         10.5        7.0        +50.1%
      As a % of sales                              48.8%    83.0%  -34.2 ppts
      Operating income                            -4.6      -4.8          NM
      Operating margin as a % of sales -21.3%  -56.2%  +34.9 ppts@@end@@

    Organic revenue growth was mainly driven by sales to government agencies in the US and Corporate Security in Europe.

    The increase in operating expenses is mainly attributable to the consolidation of Setec.

    Year-to-date 2005 financial review

    - Net sales up 8.8%, robust growth in all core business.

    - Gross margin up 2.2 percentage points, to 33.2%.

    - Operating income grew fivefold, to 51 million euros.

    - Strong increase in attributable net income, to 50 million euros

@@start.t5@@      In millions of euros                 YTD 2005 YTD 2004 % change    Adjusted(3)
                                                                                                      change (%)
      Net sales                                    677.2      622.5        +8.8%         +5.6%
      of which Telecom                         474.9      453.9        +4.6%         +4.0%
      of which Financial Services        147.1      138.0        +6.5%         +4.7%
      of which ID & Security                 55.2        30.6      +80.4%        +41.6%
      Gross profit                                224.7      193.2      +16.3%          NA
      Gross margin                                33.2%      31.0%    +2.2 ppts        NA
      Operating expenses                      173.5      183.0        -5.2%          NA
      As a % of sales                          25.6%      29.4%    -3.8 ppts        NA
      Operating income                          51.1        10.2      +400.8%
      Operating margin                          7.6%        1.6%    +6.0 ppts        NA
      Attributable net income                49.9        -7.1         NM@@end@@

    Year-to-date sales grew 8.8% with strong growth in all core businesses.

    On a geographical basis, Wireless drove a 30.7% revenue increase in the Americas, after adjusting for currency fluctuations, acquisitions and disposals. In EMEA, adjusted3 revenue rose by 2.8% but was down 14.4% in Asia.

    Gross margin was up 2.2 percentage points year-on-year, to 33.2%, reflecting a more favorable business mix as well as improved manufacturing efficiency.

    Operating expenses continue to be under control. A 3% increase, excluding restructuring charges and goodwill amortisation, but including  Setec, compares favorably with the almost 9% growth in revenue.

    Operating income grew fivefold to 51.1 million euros, with an operating margin of 7.6%.

    Attributable net income jumped to 49.9 million euros, a 57.1 million euros increase year-on-year.

    Outlook

    The Group continues to see strong momentum in its core businesses. Including Setec, Group revenue growth in 2005 will clearly exceed 10%.

    Sales of phone and scratch cards are decreasing faster than expected. Therefore, overall Gemplus organic revenue growth in 2005 will be lower than the 10% growth expectation indicated earlier. Nonetheless, excluding those businesses, organic revenue growth will be noticeably above 10%.

    With excellent third quarter results and a 7.6% operating margin year-to-date, the Company remains confident in its ability to show very strong improvement in operating income in 2005.

    The Group also continues to expect the Financial Services and ID & Security business units to turn profitable in 2006.

    Gemplus intends to remain consistently focused on profitable growth and cost efficiency. The Group continues to expect double digit revenue growth for the coming years and confirms that it is well on track to achieve its mid-term objective of a 10% operating margin in 2007.

    Business Highlights

    - Financial Services

    On the EMV side, Gemplus delivered multi-application EMV smart card microprocessor modules in mass volume to JCB, the largest card issuer in Japan. Similarly, Gemplus was selected to deliver its new generation of off-line smart banking cards, compliant with the latest MasterCard(R) specifications for EMV, for the Russian bank, Surgutneftegazbank. Both projects use the DDA(6) authentication method.

    In addition, Gemplus was selected to deliver its GemInstant cards, which are MasterCard PaypassTM compliant, to one of the top 10 US banks for their contactless payment program.

    Finally, Gemplus delivered the first translucent payment cards in volume for the Groupe Caisse d'Epargne. The cards, called GemLucence, with their mandarin-tinted transparent card body, have been specifically designed to appeal to the youth market. The project shows that Gemplus includes marketing innovation alongside technological innovation in order to help its clients attract new customers and reduce churn.

    Earnings calendar

    Fourth quarter 2005 results are scheduled to be reported on Thursday February 9, 2006, before the opening of Euronext Paris.

    Conference Call:

    The Company has scheduled a conference call for Wednesday, 26 October 2005 at 2:30 pm CET (1:30 pm GMT and 8:30 am New-York time). Callers may participate in the live conference call by dialing:

    +44(0)207-365-1849 or +1-718-354-1172 or +33(0)1-71-23-04-18

    access code 6141137

    The slide show will be available on the web site at 12:30 CET (11:30 GMT). The webcast will also be available on the IR section of www.gemplus.com.

    Replays of the conference call will be available approximately 3 hours after the conclusion of the live conference call until November 8th, 2005 midnight by dialing:

    +44(0)207-784-1024 or +1-718-354-11-12 or +33(0)1-71-23-02-48

    access Code: 6141137#

    About Gemplus

    Gemplus International S.A. (Euronext: LU0121706294 - GEM and NASDAQ: GEMP) is the world's leading player in the smart card industry in both revenue and total shipments (source: Gartner-Dataquest (2004), Frost & Sullivan, Datamonitor.). It has sold over 5 billion smart cards.

    With security at its core, and 2400 patents and patent applications produced by its innovative R&D team, Gemplus delivers a wide range of portable, personalised solutions in areas including Identity, Mobile Telecommunications, Public Telephony, Banking, Retail, Transport, Healthcare, WLAN, Pay-TV, e-government and access control.

    Gemplus' revenue in 2004 was 865 million euros.

    www.gemplus.com

    For more information:

@@start.t6@@      Press Gemplus                                    Investor Relations
      Jane Strachey                                    Gemplus
      Tel: +33(0)4-42-36-46-61                  Celine Berthier
      Mob: +33(0)6-76-49-35-93                  Tel: +41(0)22-544-5054
      Email: jane.strachey@gemplus.com      Email: celine.berthier@gemplus.com
      Edelman
      Frederic Boullard                              Fineo
      Tel: +33(0)1-56-69-73-95                  Tel: +33(0)-1-56-33-32-31
      Email:
      frederic.boullard@edelman.com          Email: investors@gemplus.com@@end@@

    (c)2005 Gemplus. All rights reserved. Gemplus, the Gemplus logo, 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.

    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.

                                          Gemplus International SA
                                Press Release - Financial statements
                         For the quarterly period ended September 30, 2005

    Consolidated Statements of Income

@@start.t7@@      (in thousands of euros, except shares and per share amounts)
                                                                Three months ended Nine months ended
                                                                  September 30,         September 30,
                                                                 2005         2004         2005      2004
                                                                    (unaudited)            (unaudited)
      Net sales                                          247,912  214,665    677,172  622,492
      Cost of sales                                  (165,153)(150,702) (452,492)(429,255)
      Gross Profit                                        82,759    63,963    224,680  193,237
      Research and development expenses    (14,984) (15,253)  (44,387) (47,699)
      Selling and marketing expenses         (29,850) (23,982)  (84,236) (74,364)
      General and administrative expenses (17,548) (14,313)  (46,001) (46,597)
      Restructuring expenses                            606    (8,638)      1,522    (8,611)
      Other operating income (expense), net    279          (1)        (439)          -
      Goodwill amortisation and impairment         -    (1,926)            -    (5,748)
      Operating income                                21,262         (150)    51,139    10,218
      Financial income (expense), net         1,894        1,482        5,370      4,289
      Share of profit (loss) of associates  (360)    (1,067)    (1,193)  (5,023)
      Other non-operating income
      (expense), net                                        (27)    (1,844)          71    (4,599)
      Income before taxes                          22,769      (1,579)    55,387      4,885
      Income tax expense                            (1,457)    (6,551)    (4,403) (10,277)
      NET INCOME                                         21,312      (8,130)    50,984    (5,392)
      Attributable to:
      Equity holders of the Company          20,873      (8,535)    49,876    (7,132)
      Minority interest                                  439          405        1,108      1,740
      Net income per share
      attributable to equity
      holders of the Company (in euros)
      Basic                                                    0.03        (0.01)        0.08    (0.01)
      Diluted                                                 0.03        (0.01)        0.08    (0.01)
      Shares used in net income per
      share calculation:
      Basic                                 627,085,562 606,882,853 615,046,595 606,584,841
      Diluted                              645,019,286 606,882,853 630,519,467 606,584,841@@end@@

    Due to the adoption of IAS 1 (revised 2003) Presentation of Financial Statements, the Company has modified its Consolidated Balance Sheet and its Consolidated Statement of Income. Please refer to Note 2.23  "Comparatives" of our 2004 Annual Report for further details.

    Consolidated Balance Sheets

@@start.t8@@                                                                                  (in thousands of euros)
                                                                                September 30,  December 31,
                                                                                      2005                 2004
                                                                                 (unaudited)
      ASSETS
      Current assets:
      Cash and cash equivalents                                      400,826          388,430
      Trade accounts receivable, net                              174,686          148,512
      Inventory, net                                                        120,637          115,610
      Derivative financial instruments                              5,393            33,387
      Other current receivables                                        78,708            66,160
      Total current assets                                              780,250          752,099
      Non-current assets:
      Property, plant and equipment, net                        158,863          148,916
      Customer contracts and technology, net                  19,491                    -
      Goodwill, net                                                          90,002            28,197
      Deferred development costs, net                              22,755            19,222
      Other intangible assets, net                                    6,261              8,965
      Deferred tax assets                                                  7,053              6,264
      Investments in associates                                        16,553            12,864
      Available-for-sale financial assets, net                 2,554              4,752
      Other non-current receivables, net                         47,781            43,900
      Total non-current assets                                        371,313          273,080
      TOTAL ASSETS                                                        1,151,563        1,025,179
      LIABILITIES
      Current liabilities:
      Accounts payable                                                    114,970            94,025
      Derivative financial instruments                              3,795                    -
      Salaries, wages and related items                          54,752            55,199
      Current portion of provisions and
      other liabilities                                                    77,087            50,217
      Current income tax liabilities                                30,454            25,708
      Current obligations under finance leases                 5,688              6,005
      Total current liabilities                                      286,746          231,154
      Non-current liabilities:
      Non-current obligations under finance leases         29,252            33,663
      Non-current portion of provisions                          25,225            25,696
      Other non-current liabilities                                 17,219            13,353
      Total non-current liabilities                                 71,696            72,712
      Shareholders' equity:
      Ordinary shares                                                      133,092          128,643
      Additional paid-in capital                                 1,062,616        1,031,558
      Retained earnings                                                 (406,965)        (459,560)
      Other comprehensive income                                      (6,055)          11,956
      Less, cost of treasury shares                                 (1,985)          (1,985)
      Equity attributable to equity holders
      of the Company                                                        780,703          710,612
      Minority interest                                                    12,418            10,701
      Total shareholders' equity                                    793,121          721,313
      TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY        1,151,563        1,025,179@@end@@

    Due to the adoption of IAS 1 (revised 2003) Presentation of Financial  Statements, the Company has modified its Consolidated Balance Sheet and  its Consolidated Statement of Income Please refer to Note 2.23  "Comparatives" of our 2004 Annual Report for further details.

    Consolidated Statements of Cash Flows

@@start.t9@@                                                                                      (in thousands of euros)
                                                                                        Nine months ended
                                                                                            September 30,
                                                                                         2005            2004
                                                                                         (unaudited)
      Cash flow from operating activities :
      Net income (loss)                                                        50,984    (5,392)
      Adjustments to reconcile net income (loss) to
      net cash from operating activities:
      Depreciation, amortisation and impairment                 30,035      43,905
      Changes in non-current portion of provisions              (292)        (723)
      and other liabilities, excluding restructuring
      Deferred income taxes                                                (1,559)        5,426
      (Gain) / loss on sale and disposal of assets          (3,648)          827
      Share of (profit) loss of associates                              877        5,023
      Other, net                                                                 (2,018)    (3,102)
      Changes in operating assets and liabilities:
      Trade accounts receivable and related current         (2,626)    (3,123)
      liabilities
      Trade accounts payable and related current                 8,619      23,491
      assets
      Inventories                                                                  9,390  (38,599)
      Value-added and income taxes                                          145      19,147
      Salaries, wages and other                                         (9,335)        6,325
      Restricted cash                                                          23,277  (21,952)
      Restructuring reserve payable                                 (12,206)  (14,010)
      Net cash (used for) from operating activities          91,643      17,243
      Cash flows from investing activities:
      Sale / (purchase) of activites net of cash            (63,401)              -
      (disposed) / acquired
      Other investments                                                      (1,463)    (3,615)
      Purchase of property, plant and equipment              (17,754)  (15,239)
      Purchase of other assets                                          (1,125)    (1,042)
      Proceeds from sale of non-current assets                    4,803
      Change in non-trade accounts payable and other          3,299        2,872
      Net cash used for investing activities                  (75,641)  (17,024)
      Cash flows from financing activities:
      Proceeds from exercise of share options                      1,817        1,288
      Payments on long-term borrowings                                 (176)          (6)
      Proceeds from sales-leaseback operations                          -          957
      Principal payments on obligations under finance      (4,441)    (4,331)
      leases
      Increase (decrease) in bank overdrafts                        (551)          377
      Dividends paid by subsidiaries to minority              (1,307)    (1,214)
      shareholders
      Changes in non-trade acounts payables on                        347              -
      financing activities
      Net cash (used for) from financing activites          (4,311)    (2,929)
      Effect of exchange rate changes on cash                         705        1,211
      Net increase (decrease) in cash and cash                  11,691    (2,709)
      equivalents
      Cash and cash equivalents, beginning of the            388,430    390,684
      period
      Cash and cash equivalents, end of the period          400,826    389,186@@end@@

    1) Accounting principles:

    The consolidated financial statements of the Company have been prepared

    in accordance with International Financial Reporting Standards (IFRS).

    2) Segment information

    2.1) Third Quarter 2005 compared with Third Quarter 2004

    2.1.1) Operating Segments

@@start.t10@@      Three months ended
                                                                                        (in millions of euros)
      Net sales                      September          September  % change  Adjusted
                                          30, 2005            30, 2004                    change(%)(x)
      Telecommunications            167.5                153.2          9%              7%
      Financial Services              58.9                 53.0         11%              1%
      Identity and Security         21.5                  8.5        155%            51%
      Total                                 247.9                214.7         15%              8%
                                                                                        (in millions of euros)
      Gross profit                 September  (% of  September (% of        % change
                                          30, 2005    net      30, 2004    net
                                                            sales)                 sales)
      Telecommunications            63.2        38%        51.7         34%          22%
      Financial Services            13.7        23%        10.1         19%          36%
      Identity and Security         5.9        27%         2.2         27%         162%
      Total                                 82.8        33%        64.0         30%          29%
                                                                                        (in millions of euros)
      Operating expenses        September  (% of  September (% of        % change
                                          30, 2005    net      30, 2004    net
                                                            sales)                 sales)
      Telecommunications          (37.9)      23%      (32.2)        21%          18%
      Financial Services          (13.1)      22%      (24.9)        47%         -47%
      Identity and Security      (10.5)      49%        (7.0)        83%          50%
      Total                                (61.5)      25%      (64.1)        30%          -4%
      Operating income (loss) September          September              Change in
                                            30, 2005            30, 2004                Operating
                                                                                                  income (loss)
      Telecommunications            25.3                    19.4                         5.8
      Financial Services              0.6                  (14.8)                      15.4
      Identity and Security        (4.6)                  (4.8)                        0.2
      Total                                 21.3                    (0.2)                      21.4
      (x) Adjusted for currency fluctuations, disposals & acquisitions@@end@@

LUXEMBOURG, October 26 /PRNewswire/ --

    2.1.2) Geographical Segments

@@start.t11@@      Three months ended
                                                                                        (in millions of euros)
      Net sales                      September          September  % change  Adjusted
                                          30, 2005            30, 2004                    change(%)(x)
      Europe, Middle East
      and Africa                      133.3                  115.0         16%                2%
      Asia                                 39.2                    44.5        -12%            -14%
      Americas                          75.4                    55.2         37%              37%
      Total                              247.9                  214.7         15%                8%
      (x) Adjusted for currency fluctuations, disposals & acquisitions@@end@@

LUXEMBOURG, October 26 /PRNewswire/ --

    2.2) Nine months 2005 compared with Nine months 2004

    2.2.1) Operating Segments

@@start.t12@@      Three months ended
                                                                                        (in millions of euros)
      Net sales                      September          September  % change  Adjusted
                                          30, 2005            30, 2004                    change(%)(x)                                                                                                                         30, 2004                                              (x)
      Telecommunications          474.9                453.9          5%                  4%
      Financial Services          147.1                138.0          7%                  5%
      Identity and Security        55.2                 30.6         80%                 42%
      Total                                677.2                622.5          9%                  6%
                                                                                        (in millions of euros)
      Gross profit                 September  (% of  September (% of        % change
                                          30, 2005    net      30, 2004    net
                                                            sales)                 sales)
      Telecommunications          176.9        37%         156.5      34%              13%
      Financial Services            29.7        20%          28.0      20%                6%
      Identity and Security        18.1        33%            8.7      29%            107%
      Total                                224.7        33%         193.2      31%              16%
                                                                                        (in millions of euros)
      Operating expenses        September  (% of  September (% of        % change
                                          30, 2005    net      30, 2004    net
                                                            sales)                 sales)
      Telecommunications         (114.1)      24%      (109.9)      24%                4%
      Financial Services          (30.7)      21%        (50.3)      36%            -39%
      Identity and Security      (28.7)      52%        (22.8)      75%              26%
      Total                              (173.5)      26%      (183.0)      29%              -5%
      Operating income (loss) September          September              Change in
                                            30, 2005            30, 2004                Operating
                                                                                                  income (loss)
      Telecommunications            62.8                      46.5                         16.3
      Financial Services            (1.1)                  (22.2)                        21.1
      Identity and Security      (10.6)                  (14.1)                         3.5
      Total                                 51.1                      10.2                         40.9
      (x) Adjusted for currency fluctuations, disposals & acquisitions@@end@@

    2.2.2) Geographical Segments

@@start.t13@@      Three months ended
                                                                                        (in millions of euros)
      Net sales                      September          September  % change  Adjusted
                                          30, 2005            30, 2004                    change(%)(x)
      Europe, Middle East
      and Africa                      353.6                 320.9          10%                3%
      Asia                                127.2                 147.8         -14              -14%
      Americas                         196.4                 153.8          28%              31%
      Total                              677.2                 622.5            9%                6%
      (x) Adjusted for currency fluctuations, disposals & acquisitions@@end@@

    (1) Free cash flow excluding non recurring items is defined as net cash flow from operating activities less the purchase of property, plant and equipment and other investments related to the operating cycle (excluding acquisitions and financial investments).

    (2) Europe, Middle-East, Africa

    (3) After adjusting for currency fluctuations, acquisitions and disposals.

    (4) Includes 10.6 million euros of goodwill amortisation and restructuring expenses in the third quarter 2004, and the expensing of stock options from the first quarter 2005.

    (5) EMV is a jointly defined set of specifications adopted by Europay, MasterCard and Visa for the migration of bank cards to smart card technology.

    (6) Dynamic Data Authentication : to reduce the risk of card fraud, EMV standard defined dynamic offline authentication mechanisms based on asymetric cryptography. DDA smart card authentication system generates a unique signature on every transaction, making it very difficult to copy.

ots Originaltext: Gemplus SA
Im Internet recherchierbar: http://www.presseportal.ch

Contact:
Press, Gemplus, Jane Strachey, Tel: +33-(0)-4-42-36-46-61, Mob:
+33(0)6-76-49-35-93, Email: jane.strachey@gemplus.com, Edelman,
Frédéric Boullard, Tel: +33(0)1-56-69-73-95, Email:
frederic.boullard@edelman.com, Investor Relations, Gemplus, Céline
Berthier, Tel: +41(0)22-544-5054, Email: celine.berthier@gemplus.com,
Fineo, Tel: +33(0)1-56-33-32-31, Email: investors@gemplus.com



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