Cell-Phone Fever Cures Gemplus' Chill

By Gene G. Marcial

Smart Cards, Smart Return
Gemplus International (GEMP ), No. 1 in smart cards in market share, is on a roll. The Luxembourg outfit offers smart-card services to telecom and financial-services companies for use in security, wireless, and e-businesses. Gemplus' smart card can add, delete, or manipulate information in its memory. In cell phones, the technology is integrated into the handset and stores data. Traded in the U.S. as American depositary receipts, Gemplus has risen from 2.75 in August to 5.02 on Feb. 4.

The surge in smart-card demand is due in part to rising sales of cellular phones, says Eric Swergold of Gruber & McBaine Capital Management, which owns 2.9 million shares. He sees the stock hitting 8 this year and 12 in 18 months. Gemplus has been in the red but is on the mend, says Swergold, who sees it earning 10 cents to 15 cents a share in 2004 and 35 cents to 40 cents in 2005. Jason Diamond of CapStone Investments says Gemplus' clients include Nextel (NXTL ) and Vodafone (VOD ). It also is in partnership with IBM (IBM ), Microsoft (MSFT ), and MasterCard. And it has a contract to ship 2 million cards to the United Arab Emirates for an ID security system, says Diamond, who rates the stock a strong buy.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

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