CMIV diamond in the rough too? Read this re smart card potential. yah baby??
13-Mar-00 18:10 ET
This edition of StreetBeat looks at Schlumberger (SLB), and in particular, their smart card division. Prabhas R. Panigrahi, Senior Vice President - Oilfield Services and Equipment Analyst at Dresdner Kleinwort Benson calls Schlumberger's smart card division a "diamond in the rough." We've asked him a few questions to find out more about this industry.
Q&A
Briefing.com: Can you discuss what a smart card is, its uses and what the compelling reasons are behind consumers moving towards using a smart card?
P.R. Panigrahi: A smart card is typically a plastic card of the size of a credit card, with an embedded integrated circuit chip. Although smart cards have existed for 20 years and have been used to provide functionalities like identification, stored value, bank access, medical record and health insurance, it is the explosive growth of e-commerce and the need for security that is bringing smart card to the spot light. While secured e-commerce transactions relies on PKI (public-key infrastructure) and digital certificate technology, smart card, with its tamper-resistant security, mobility and interoperability, provides the best means of storage for digital certificates and security client applications. Since security underlies all mission-critical transactions over the Internet, we believe smart card will become a key component of the Internet economic infrastructure and should permeate into most activities of consumers and corporate entities.
Why smart cards? One reason is the ease of use. Smart cards are efficient, paperless and intuitive. They are capable of being used similar to magnetic cards at an ATM machine, through a PIN or biometric identification. The ease of use belies the sophistication that its semiconductor-embedded functionality is able to deliver. They also offer enhanced security. Smart cards are capable of storing and processing secret and private keys, other encryption tools, and can process high-level security features like digital signatures on the cards, which can be further enhanced by changing three dynamic variables: time, event and a unique encryption variable such as a PIN.
Smart cards also offer mobility and versatility. Whether being permanently installed behind Global System for Mobile Communications (GSM) phones or being able to be read by PCs and other information appliances such as PDAs, interactive TVs and others, smart cards are quite mobile and versatile. This mobility and versatility are ideally suited, as the world moves into a ubiquitous Internet connectivity through information appliances.
Briefing.com: Are the reasons for using a smart card even more compelling in the wireless arena, and if so why?
P.R. Panigrahi: Wireless Internet will be a strong growth driver for the smart card industry because the mobility feature of the smart card. Technologies are converging and smart card will be interoperable across different platforms, including wireless phones, PCs, TV set top boxes, hand held devices, etc. Therefore, it is really the convergence of technologies and the ubiquity of the Internet (that is the ability of the consumer to reach Internet from anywhere, at any time using any medium) that will drive the growth for smart cards.
Briefing.com: Who are Schlumberger's competitors in this arena, and what potential advantages does SLB have over the others in this space?
P.R. Panigrahi: Schlumberger's competitors include Gemplus, Orberthur (De La Rue), Giesecke & Devrient, Bull, etc. SLB's advantage includes technology leadership, 25 years of experience, entrenched commercial and technology leadership with industry heavyweights and its focus on providing clients with integrated solutions.
Briefing.com: How does Schlumberger plan to bring this portion of its business to investor's attention? Do you anticipate a spin-off or creation of a tracking stock?
P.R. Panigrahi: Our conservative estimate of Schlumberger's smart card business points to $13 billion. However, we do not believe that the market has recognized this value in SLB's stock price. The challenge for Schlumberger's management is to unlock the values in its smart card business. This could happen through a spin-off or creation of a tracking stock. The smart card valuation could come further under the spot light if Schlumberger's competitors, Gemplus and Oberthur come to the public market (as anticipated in the next 6-9 months) and command a good valuation.
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