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Gemalto, who's happy?

Week 44, 2006

When the merger was announced, one of the reasons that was given was to reinforce the company in order to create shareholder value. Since the first announcement of the merger in December 2005, Axalto shareholders have lost 23% of their investment, and Gemplus shareholders have lost 26%.

Another announced objective of Gemalto creation was to avoid (or at least reduce) the Average Selling Price (ASP) erosion. The results just published by Gemalto (cf. below) demonstrate this objective has not been reached.

Was the merger beneficial to customers? Most of the major customers in our industry have a multiple source policy. When the two leaders of the industry merged, many customers have had to look for new sources of cards, reinforcing the competitors of Gemalto: Giesecke & Devrient, Oberthur, Sagem-Orga, and also many smaller manufacturers, especially from Asia.

Did the employees find an opportunity in Gemalto creation? As in any merger between large companies, there has been some difficulties in adjusting different company cultures. But the major difficulty came more from the fact the companies were more similar than complementary. Being in the same industry, with the same technology, and on the same markets, Axalto and Gemplus had many employees in similar positions with similar skills. Lots of energy has been spent on building new org charts, but the arrangement of people in the available positions has left many of them unhappy with the outcome. Different company cultures have not been forgotten yet, employees are referred as "Gem" or "Alto" depending on which company they come from.

Since the merger, results have not been up to the level of expectations thus everyone anticipates future layoffs. The only remaining question is how many people will be fired and when.

So who's happy after the merger?

Thierry SpanjaardChief EditorSmart Insights