For the quarter it posted net income of 1.1m euros ($1.3m), compared with a net loss of 82.4m euros ($99.1m) in the year-ago quarter. Revenue rose 22% to 210.5m euros ($253m), from 172.4m euros ($207.5m) in the year-ago quarter. Revenue was boosted after strong sales of high-end cards to telecoms companies. Cash also remained stable at 383.1m euros ($461m).
The turnaround at the Luxembourg-based company comes after two years of difficult market conditions. During the downturn, it suffered badly from a fall in demand from the mobile phone industry and rising competition in Asia.
It was stricken by internal management disputes, which resulted in the ousting of both its CEO and chairman. The current CEO, Alex Mandl, had a difficult start at the company after he was attacked by both French unions and shareholders for the size of his pay packet, and the fact that he served on the board of trustees of a non-profit organization sponsored by the US Central Intelligence Agency. The company also offloaded nearly a third of its workforce.
Another cloud hanging over the company was a 40m euro ($47.4m) back-tax bill, issued after a row over where the company is based. The French tax authorities disputed its claim to have moved its headquarters to Luxembourg back in December 1999.
Yet Gemplus has now reached an agreement with the French tax authorities and will pay 34m euros ($41m) before the end of 2004. This is in line with the company’s provision, so there is no material impact on the second-quarter results.
Looking forward, Gemplus struck a bullish tone saying that sales to mobile phone operators in both western and developing economies would increase strongly for at least another five years. Alex Mandl, chief executive said operators were turning to more complex SIM cards to boost their revenues from individual customers. Mandl also said demand is coming from developing countries where mobile penetration is still relatively low.
The robust growth in mobile phone sales, which make up three-quarters of the company’s activity, meant that Gemplus increased its full-year profit forecast by 5m euros ($6m) to 30m euros ($36.2m).
