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Gemalto already two years old!

Week 23, 2008

Olivier Piou recently gave an interview to the French daily Les Echos, in which he proclaims the success of the merger. Olivier Piou claims that Gemalto is the uncontested number 1 in the industry, and that more than 3 billion human beings (or half of the world population) use Gemalto products. Olivier Piou claims Gemalto is the ledger both in the telecom segment, which represent more than 50% of the company's sales, and in the banking segment. The company made EUR 200 million in the so-called "security" segment, that integrates ID, such as ePassports, and enterprise security, the core of Olivier Piou development strategy.

Last week, we announced that Q1/2008 new handset sales in the US dropped 22% vs. Q1/2007, and this week, we learn that Western Europe handset sales decreased 16% in Q1/2008 vs. Q1/2007.  Gemalto CEO claims that the SIM card industry is unaffected by this consequence of the global economic downturn, as SIM card sales figures are not a direct function of the handset sales figures. In 2007, 2.6 billion SIM cards have been delivered while only 1 billion handset were sold.

Olivier Piou claims that he will reach the 10% gross margin in 2009 objective he announced at the time of the merger between Axalto and Gemplus. He also expects a yearly 8 to 12% internal growth, and even an average 10% yearly growth over the next ten years!

But, along with these positive figures and outlooks, one cannot forget this merger triggered a terrible price war, that lead to cutting SIM ASP(Average Selling Price) by around 40% in the year following the merger. The merger also meant that Gemalto's marketshare is far from being the sum of Gemplus and Axalto marketshares. Olivier Piou recognizes a 5% marketshare loss following the merger and blames the price war on its competitors, whereas we all understood most of the price cuts went from Axalto and Gemplus teams struggling with each other internally! The merger is not yet a reality inside the company. Gemalto employees keep on referring to each other as "Gem" or "Alto" depending on their company of origin. In every merger company culture is the hardest part to integrate.

Thierry Spanjaard
Chief Editor
Smart Insights