re: WSJ on GEMP Q1
>> Gemplus Swung to a Loss in 1st Quarter: Hurt By Slowdown in Mobile-Phone Sales
WSJ.com
News Roundup
May 2, 2001
Gemplus International SA unveiled plans to restructure its operations world-wide to cut costs after it plunged into the red in the first quarter, hurt by slowing mobile-phone sales.
The Luxembourg-based company -- the world's leading maker of smart cards -- said Wednesday it swung from a profit to a loss despite seeing strong revenue growth. Gemplus also warned that full-year revenue is likely to decline as the demand for the SIM cards it supplies to mobile-phone handset industry is expected to slow as the major telecommunications companies like Nokia and Ericsson have lowered their sales forecasts for the year.
Gemplus posted a net loss of 7.16 million euros ($6.4 million), or one European cent a share, compared with a net profit of 14.5 million euros, or four European cents a share, a year earlier.
The company reported an operating loss of 2.5 million euros, against operating profit of 13.6 million euros a year earlier, as sharp increases in research and development, marketing, and administrative costs offset a surge in revenue.
Revenue rose 27% to 293.6 million euros from 231.7 million euros a year earlier.
Gemplus forecast full-year operating profit, before restructuring charges, will be 90 million euros to 100 million euros, compared with 127 million euros in 2000.
The company said it will take a 35 million euro charge in the second quarter to cover restructuring costs as it studies the possible closure of its Seebach manufacturing plant in Germany, amid a world-wide shakeup of its manufacturing facilities and financial and e-commerce activities.
"These actions are necessary," said Chairman and Chief Executive Antonio Perez in a prepared statement. "They will allow Gemplus to improve its financial performance and to better use its resources to benefit from the market's healthy outlook."
Gemplus said it foresees cost savings of around 40 million euros a year from the restructuring plan, beginning in the second half of this year.
More than 71% of Gemplus's revenue comes from the telecom industry, and more than three-quarters of that is related to mobile communications. The company dominates the market for SIM cards, with a more than 40% share in 1999. SIM card sales also are Gemplus's most profitable line of business, with margins exceeding 40%.
But the company said the sectors it serves aren't growing as fast as it had earlier hoped, and it has revised downward its forecast for growth in demand for smart cards from the mobile telephone makers as they reduce high levels of inventory.
At the same time, Gemplus said demand from the financial-services sector remains healthy, and projected revenue growth of 7% in the second quarter.
The company's first-quarter results follow a profit warning issued last month, when Mr. Perez said the company would record a small first-quarter loss and find it hard to meet full-year targets, although he downplayed how vulnerable Gemplus was to the slowdown in the telecoms sector.
In February, Gemplus forecast revenue growth in 2001 of 30% to 32%, with earnings expected to grow 27% to 30%. <<
- Eric - |
