SCM Microsystems Inc was launched in 1990 following the realization that flash chip technology was a possible replacement for floppy and hard disks in mobile personal computers. Company founder and president Robert Schneider, who left semiconductor giant Intel Corp to set up SCM, decided that flash chip technology ‘was something very promising’. But in 1994 he had a change of heart, relegating flash chips to a secondary position in the company’s strategy believing that the appointment of PCMCIA as a worldwide technology for security presented an even greater opportunity. This turn around was driven by the use of the internet and the need for technology to ensure secure transactions. Schneider saw that if he could solve the problem of getting a PCMCIA card slot to read a smartcard, he could offer mobile users the equivalent of a secure key.
Difference in the thickness
The problem was that, while PCMCIA cards and smartcards were identical in length and width, there was about a 5mm difference in the thickness of the two cards. After solving this problem, the company then set about adapting PCMCIA cards for desktops and workstations. It now has a contract with the US Department of Defense, DoD, which uses personal computers from IBM Corp, Dell Computer Corp and Compaq Computer Corp. Schneider claims that the US computer industry is now moving towards the use of smartcards as security devices and cites the DoD contract as proof that eventual take up by corporates will inevitably follow. New technologies start in government and then find their way into corporate culture, he says. Schneider predicts that the next main group to pick up on the technology will be the banking sector and he says that, using smartcards, a contract between two distant users could be signed with the absolute confidence that no-one else has access to the data. To date, Schneider’s convictions have been proved very lucrative. Since SCM changed emphasis in 1994, its revenues have soared from $6m to $22m in 1996 with about 50% of revenues coming for the US. Only 15% of SCM’s revenues now come from flash chip technology and the rapid increase is primarily attributed to its smartcard reader SwapSmart and its PCMCIA products for the desktop and workstation. The company has been ‘slightly profitable’ since the third quarter of last year and is expecting full profit this year. Venture capitalists TVM and Vertex started putting money into SCM in 1993 and a fresh round has been added every year with Nippon Investment and Hochu the most recent investors. In total the company has raised around $15m. According to Schneider about 30% of the company remains in its founders hands and expansion into Japan is the next major step following a distribution contract with Fujitsu Ltd. The company already conducts business with some major players including Siemens Nixdorf, France Telecom, Sun Microsystems Inc and Dell. It has also become a major supplier for several manufacturers. SCM’s headcount has increased rapidly since 1990 and now stands at approximately 70 staff divided between the US and Germany, and a development group in France. This group is working on smartcard and encryption technology, to stay ahead of rivals – US based Action Tech and Japanese giant Toshiba Corp.