Gemalto Shares Rise on Sales Forecast for Second Half

Gemalto NV, the world's largest maker of smart cards, climbed in Paris trading after saying it will return to revenue growth in the second half.

Gemalto's shares jumped 1.58 euros, or 8.7 percent, their biggest gain since July 2006, to 19.85 euros, giving the company a market value of 1.81 billion euros ($2.51 billion).

Revenue will increase in the second half with a ``probable'' return to sales growth from the third quarter, Chief Executive Officer Olivier Piou said in an interview today. Revenue dropped 10 percent in the first half. Gemalto was created last year as smart-card makers Gemplus International SA and Axalto Holding NV combined to cut costs as competition from China hurt prices.

``Investors are reassured,'' Bertrand Laport, a Paris-based analyst with Fortis who has a ``hold'' rating on Gemalto, said in a phone interview. ``The recovery should accelerate during the second half.''

The Meudon, France-based company forecast full-year revenue will remain little changed from last year as competition and the U.S. dollar's decline may weigh on growth, Piou said. Gemalto is aiming for annual sales growth of 8 percent to 12 percent in coming years, he said.

Profit excluding merger costs fell to 24.5 million euros from 28.9 million euros a year earlier, the company said today. Including those expenses, the company posted a net loss of 48.4 million euros.

``The margins are satisfying at the mobile-phone business but we've still got work to do on the banking and identity branches,'' Piou said. Full-year operating profit of 55 million euros to 60 million euros is a ``reasonable'' forecast, he said.

Mobile-Phone Cards

Gemalto's operating profit fell 53 percent to 59.9 million euros in 2006 as prices for mobile-phone cards, the company's largest business, declined about 35 percent.

``We're not on the same price curve as last year,'' Piou said. Mobile-phone card prices will decline 10 percent to 20 percent this year, he said.

Gemalto appointed Jacques Tierny as chief financial officer, replacing Charles Desmartis, the company said today in a separate statement. Tierny, a former CFO at French supermarket owner Casino Guichard-Perrachon SA, worked at KPMG Corporate Finance in Paris since January, Gemalto said.

In March, the company said it might post a first-half loss as intensified competition in the mobile-phone card market cut profit margins.

Gemalto's mobile-phone card unit's operating profit was 8.5 percent of sales in the first half, compared with 6.2 percent last year. The company had operating losses at its identity card and banking payment card units.

Gemalto produces so-called SIM, or subscriber identity module, cards used in mobile phones for functions such as storing addresses.

To contact the reporter on this story: Fabio Benedetti-Valentini in Paris at fbenedettiva@bloomberg.net.

To contact the editor responsible for this story: Victoria Richards at vrichards@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.