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Gemplus
                 Investors Presentation




                                    Alex Mandl – President & CEO
     ...
Disclaimer

    Some of the statements contained in this presentation constitute forward-looking statements. These
    sta...
Highlights

    • Security as key driving force in current environment
    • Gemplus is the leader in smart card based tec...
Secured solutions for the real world

    Smart cards efficiently procures security, intelligence and
      convenience, b...
Gemplus: key enabler of secured platforms


    • The Worldwide leader in the smart card industry:
        30% market shar...
Three Core Markets
                           Leveraging leading position
                   to realize opportunities in g...
Our Added Value
    • Gemplus provides from smart card components to complete
      end-to-end solutions
       Solution D...
The SIM Card
                                    A relationship tool
                 • Over one billion SIM Holders
     ...
The SIM Card
                    An asset in the core network

    A relatively small investment for the carriers driving ...
The SIM Card
         An Incremental Revenue Source for Cellular Carriers


           64K                      128K      ...
Results improvement driven by migration
                   to high-end products
                   70
                    ...
A profitable growth strategy:
            Two pronged market approach

     • Differentiate in value on high       • Run e...
Revenue                                      Achievements:
         In €m
                              232.6
            ...
Revenue by business segment
                                                                            232.6
            ...
New Management leadership (1)

     • Alex Mandl (President & CEO since September 2002):
         Previously, Chairman & C...
New Management leadership (2)

     • Philippe Combes (Executive VP Operations and Financial Services since January
      ...
Summary

     • Security as key driving force in current environment
     • Gemplus is the leader in smart card based tech...
Appendix




18
                Investors presentation September 2004
What is a contact smart card…

                                           Card body

                       Micro computer...
And a contactless smart card?

     Card body                     Card body
      (front)                       (back)



...
Microprocessor smart card:
             a computer inside a card



                               R      E
          ROM ...
Global reach, local presence




22
                                Investors presentation September 2004
Our profitable growth strategy:
           Supported by R&D Investment

     • Differentiation: high-end solution and serv...
R&D highlights


     • More than 630 R&D engineers around the world

     • 4 Research & Development centers
         Org...
The SIM Card
                  A Service Enabling Platform: the SIMfrastructure

          Manage Complexity              ...
Share Ownership Structure


                                                            26.2%   Texas Pacific Group
      ...
Board of Directors

     Mr. Dominique Vignon (56)         Chairman of the Board
     Mr. Alex Mandl (60)               Ch...
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Gemplus Investors 2004

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Transcript of "Gemplus Investors 2004"

  1. 1. Gemplus Investors Presentation Alex Mandl – President & CEO Frans Spaargaren – Executive Vice-President & CFO Jacques Seneca – Executive Vice-President R&D, Identity & Security September 2004
  2. 2. Disclaimer Some of the statements contained in this presentation 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 presentation 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 presentation speak only as of this presentation. 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. 2 Investors presentation September 2004
  3. 3. Highlights • Security as key driving force in current environment • Gemplus is the leader in smart card based technologies and solutions • Strong momentum in core markets: −SIM card as core element of wireless ecosystem −Financial services growth driven by need for secure platforms −Multiple attractive emerging growth markets in ID & Security • Strong leadership in place to realize those opportunities • Strongest balance sheet in our industry • Profitable growth strategy supported by emphasis on R&D investment 3 Investors presentation September 2004
  4. 4. Secured solutions for the real world Smart cards efficiently procures security, intelligence and convenience, benefiting to many different markets Mobile Telecommunications Banking & & Public Telephony Retail Identity & Privacy management HealthCare & Access control E-government Transport Electronic Transactions 4 Investors presentation September 2004
  5. 5. Gemplus: key enabler of secured platforms • The Worldwide leader in the smart card industry: 30% market share globally (source: Gartner April 2004) #1 in shipment and revenue #1 in SIM revenue • Revenue €749 m in 2003 (US$846 m), 25% growth in 1st half 2004 vs. 1st half 2003 • Market capitalization: approximately €900 m / US$1.1 bn • Listed on Euronext Paris and NASDAQ (US-GAAP and IAS/IFRS compliant) 5 Investors presentation September 2004
  6. 6. Three Core Markets Leveraging leading position to realize opportunities in growth markets Telecom Telecom Financial Services Financial Services ID / Security ID / Security (74% of revenues) (74% of revenues) (21% of revenues) (21% of revenues) (5% of revenues) (5% of revenues) Opportunities: Opportunities: Opportunities: • Evolving strategic role of the SIM • EMV migration gaining • Emerging high growth card for telecom operators momentum market • Increasing SIM penetration • Many evolving projects 6 Investors presentation September 2004
  7. 7. Our Added Value • Gemplus provides from smart card components to complete end-to-end solutions Solution Discovery Development & Deployment Smart Cards & Smart Card Interface Advisory Services Consulting/ Diagnostic/ Planning Cards Issuance Solutions Solution Definition/Implementation Front & Back-end Systems Training Services Project Management 7 Investors presentation September 2004
  8. 8. The SIM Card A relationship tool • Over one billion SIM Holders Migration to high end cards in GSM W-CDMA in Japan SIM adoption in Americas Cellular carriers revenue M units Sim Subs Non Sims Voice Data $bn 2500 700 2000 600 500 1500 400 1000 84% 300 500 73% 200 100 0 0 2003 2006 2003 2006 Worldwide Worldwide Annual +16% Per Year* Av. Growth 03-06: +10% Per Year* 8 * Source: Gemplus market analysis Investors presentation September 2004
  9. 9. The SIM Card An asset in the core network A relatively small investment for the carriers driving tremendous revenue opportunities Supports end-user relationship for carriers The only 100% operator-managed network element in the hands of the end- user A response to carriers’ challenges for next generation wireless Manage the growing complexity of the handset platform Stimulate the adoption of mobile data services Strengthen brand awareness 9 Investors presentation September 2004
  10. 10. The SIM Card An Incremental Revenue Source for Cellular Carriers 64K 128K 256K Carrier Admin Files Carrier Admin Files Carrier Admin Files Services Access Menus Services Access Menus Services Access Menus Phone Book Services Phone Book Sves Phone Book Services Roaming Roaming Roaming Handset provisioning Handset provisioning Call completion Call completion Enterprise Services Enterprise Services SMS based games SMS Based games Location Based Sves Location Based Sves 3G Phone Book Personal Credentials Quality of Service The SIM Card facilitates the transition towards data/3G 10 Investors presentation September 2004
  11. 11. Results improvement driven by migration to high-end products 70 Mid-range 60 (32Kb) % Shipments 50 High end 40 (64Kb and above, 3G) 30 20 Low end 10 (8Kb &16Kb) 0 02 02 02 03 03 03 03 04 04 2 3 4 1 2 3 4 1 2 Q Q Q Q Q Q Q Q Q Low end Mid range High-end • Ongoing migration towards higher-end cards • High-end cards (64Kb and above, 3G) account now for 11 33.4 % of total shipments (vs. 22.4 % in Q1 04) Investors presentation September 2004
  12. 12. A profitable growth strategy: Two pronged market approach • Differentiate in value on high • Run efficiently the commodity end: segment: First to market with rapid cycle Improve manufacturing time utilization Value added to enable Increase buying power customer’s differentiation Serve efficiently: providing Premium on R&D/ innovation competitive costs, on-time capacities delivery, and high quality Encouraged long term customer partnerships 12 Investors presentation September 2004
  13. 13. Revenue Achievements: In €m 232.6 210.5 Delivering steady results 154.2 172.4 190.0 197.3 improvement •Financial result consistently improved last 5 quarters in a row Q1 Q2 Q3 Q4 Q1 Q2 •Q2 2004: 03 03 03 03 04 04 •Group revenue up 22.1 % year-on-year Operating Result •Highest gross margin in 3 years: 32.3% (up (excl. restruct. & goodwill) 1.3 ppt QoQ) In €m 8.5 4.8 •Operating profit before restructuring and 1.8 0.0 goodwill: €8.5 m (from €4.8 m in Q1 04) •Net profit: €1.1 m (from €0.3 m in Q1 04) -13.9 •Strongest balance sheet of the industry: -27.3 Q1 Q2 Q3 Q4 Q1 Q2 cash position end Q2 04: €383 m 13 03 03 03 03 04 04 (US$463 m) Investors presentation September 2004
  14. 14. Revenue by business segment 232.6 210.5 190.0 197.3 172.4 176.3 In € m 132.3 154.0 124.2 146.6 38.8 47.8 45.2 40.4 44.7 9.4 9.8 11.1 10.3 11.8 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 ID/ Security Fin. Services Telecom • Year-on-year change*: Q2 04 Group revenue up 25.0 % • Telecom up 27.4 %, of which Wireless up 45.5 % • Financial Services up 16.7 % • Identity & Security up 26.9 % • Quarter-on-quarter change*: Q2 04 Group revenue up 4.3 % • Telecom up 2.6 % • Financial Services up 8.6 % 14 • Identity & Security up 12.1 % * After adjusting for currency fluctuations, discontinued operations and acquisitions Investors presentation September 2004
  15. 15. New Management leadership (1) • Alex Mandl (President & CEO since September 2002): Previously, Chairman & CEO of Teligent, a telecommunication and internet services company. AT&T (91-96): President and COO, prior to this, CFO. Sea-Land Services Inc. (87-91): Chairman and CEO Board member of Dell Computer Corporation • Frans Spaargaren (Executive VP & CFO since June 2004): Philips Electronics: Executive VP of Philips International (01-04), with responsibility for its joint venture operations (combined revenue of US$10 bn), CFO (98-01) of Philips Components (€5 bn) Varta Batteries: various financial and general management positions in the Benelux and Germany (87-01) • Jacques Seneca (Executive VP, R&D, ID & Security): Joined Gemplus in 1989, then held several management positions including General Manager for the Telecom Division, Executive VP Marketing & Technology, and Head of R&D. 15 Investors presentation September 2004
  16. 16. New Management leadership (2) • Philippe Combes (Executive VP Operations and Financial Services since January 2003): Philips Electronics (99-02): Chairman & CEO, LG-Philips Displays joint venture (Hong- Kong), previously, CEO, Display Components Business Group. Thomson Multimedia (88-99): VP Europe & Asia, Tube Operations ; previously, held various management positions in manufacturing. • Philippe Vallée (Executive VP Telecom Business Unit): Joined Gemplus in 1991, held various management positions including VP, Marketing and Executive VP, Gemplus Technologies Asia. Previously, he was with Matra Communication in France. • Ernie Berger (President, North America since January 2004): 15 years of experience in the financial services sector with American Express and First USA, where he held senior management positions. More recently, he was instrumental in the start-up of new business ventures. 16 Investors presentation September 2004
  17. 17. Summary • Security as key driving force in current environment • Gemplus is the leader in smart card based technologies and solutions • Strong momentum in core markets: − SIM card as core element of wireless ecosystem − Financial services growth driven by need for secure platforms − Multiple attractive emerging growth markets in ID & Security • Strong leadership in place to realize those opportunities • Strongest balance sheet in our industry • Profitable growth strategy supported by emphasis on R&D investment 17 Investors presentation September 2004
  18. 18. Appendix 18 Investors presentation September 2004
  19. 19. What is a contact smart card… Card body Micro computer Module (contact) Communication by direct electrical contact with a reader Two types: Memory or Microprocessor 19 Investors presentation September 2004
  20. 20. And a contactless smart card? Card body Card body (front) (back) Micro computer Antenna Communication with a remote reader 20 Investors presentation September 2004
  21. 21. Microprocessor smart card: a computer inside a card R E ROM E F A CPU M P L R A O S SECURITY M H • OS: designed by Gemplus / loaded by chip Operating System manufacturers + Applications • CPU: 8-16-32 bit • ROM code: 50 Kb to 400 Kb • EEPROM: 1Kb to 256Kb and above 21 Investors presentation September 2004
  22. 22. Global reach, local presence 22 Investors presentation September 2004
  23. 23. Our profitable growth strategy: Supported by R&D Investment • Differentiation: high-end solution and services, global offering Wireless: 3G card efficiency Over The Air high performance platforms for remote card management Card issuing and card management flexibility Financial Services Multi-applications cards: loyalty High end personalization solutions ID: subsystems approach Combi and contactless cards: security and flexibility (Java based) Issuing solutions Cards management system partnerships • IT: cards and environment • High end cards (Pki based, contact/contactless) • Cards Applets • Readers & middleware • IP status: • Gemplus owns 2400 patents 23 Investors presentation September 2004
  24. 24. R&D highlights • More than 630 R&D engineers around the world • 4 Research & Development centers Organization based on expertise centers: • Research & Security • Operating systems Platform • Product Development Center And proximity to customers combining R&D and Integration Services resources • Europe, Asia-Pacific, China, USA • An incubation group for emerging market and technologies • An extra 300 technical consultants throughout the world for integration and customer support 24 Investors presentation September 2004
  25. 25. The SIM Card A Service Enabling Platform: the SIMfrastructure Manage Complexity Device • Control support costs Agnostic • Provide the best user experience Interoperable • Limit Telco R&D for Handset Automatic Stimulate Service Adoption Device Detection • Service promotion • Service discovery Network Access Manage Brand Enabler • Make service portfolio and brand visible on any device Secure • Device personalization Provisioning & • Non subsidized devices Control The SIM requires a suite of software in the carrier back-end 25 Investors presentation September 2004
  26. 26. Share Ownership Structure 26.2% Texas Pacific Group Free float 39.0% 19.0% Quandt family Brunei Investment 2.6% Agency 3.7% 5.4% Dassault Group General Electric Capital 4.0% Corporation Raffeisen Centro Bank 26 Investors presentation September 2004
  27. 27. Board of Directors Mr. Dominique Vignon (56) Chairman of the Board Mr. Alex Mandl (60) Chief Executive Officer Mr. David Bonderman (61) Vice-Chairman of the Board / Managing Partner, Texas Pacific Group Mr. William S. Price (48) Managing Director, Texas Pacific Group Mr. Geoffrey Fink (34) Principal, Texas Pacific Group Mr. Johannes Fritz (49) Managing Director, Quandt family office Dr. Peter Kraljic (64) Member of the Mc Kinsey Advisory Council Mr. Werner Koepf (62) Board member, Marconi Corporation plc Mr. Daniel Le Gal (53) Partner and Managing Director, Finadvance Since April/June 2004: Michel Akkermans (44) Founder and Chairman, Clear2Pay John Ormerod (55) Former Senior Partner, Deloitte & Touche LLP Kurt Hellström (60) Former President and CEO of Ericsson 27 Investors presentation September 2004

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