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Mixed results for our industry

Week 12, 2007

In an industry where price fall is permanent, traditional card manufacturers are facing difficulties. Gemalto is barely profitable with EUR 1.6 million profits, and decreasing sales vs. the combined sales of Gemplus and Axalto last year. A large part of Gemalto difficulties are not coming from the market situation but from internal causes: the combination of two equivalent structures has lead to many overlapping areas in the organization. And this combination has made the organization heavier and less reactive to market movements than its smaller competitors. The merger period is also held responsible for the price war that drove SIM prices down quicker than ever during the first half of 2006.

Oberthur has been affected by the SIM prices drop as much as the rest of the industry, but also by some issues on its traditionally strong payment market segment. The company shareholders imposed a cost reduction plan in 2006, and difficulties in its implementation led to the replacement of Pierre Barberis by Philippe Geyres in the CEO position.

Sagem Orga is a department of a larger organization, so it has no obligation to publish results. But one may remember that Sagem acquired Orga on the verge of bankruptcy. Now, due to company and government politics, Sagem Orga has been integrated into the larger Safran Group, which keeps on fighting internal battles.

Giesecke & Devrient is always very discrete on its performance. The smart card activity is a department in a larger organization, thus its profitability is unknown to the public.

Ingenico shows an impressive recovery. After a difficult 2005 due to the integration of several acquisitions, and the technological convergence needed between various lines of products, 2006 is the year of the return to profitability. Ingenico only made one acquisition in 2006, Moneyline, which has had little impact on the overall company performance. The payment terminals industry is not without issues: competition from the Far East is more aggressive, alternate payment solutions develop, and technology changes quickly, essentially through the arrival of contactless, NFC, and new communication protocols, leading the terminal industrialists to an increasing R&D expense. When comparing Ingenico to its closest counterparts, Verifone (cf. Smart Insights #06-50) still has a better profitability ratio than Ingenico, but Hypercom (cf. Smart Insights #07-11) is affected by difficulties in following market evolutions.

Thierry Spanjaard
Chief Editor
Smart Insights