1. Gemplus
Investors Presentation
Alex Mandl – President & CEO
Frans Spaargaren – Executive Vice-President & CFO
Jacques Seneca – Executive Vice-President R&D, Identity & Security
September 2004
2. Disclaimer
Some of the statements contained in this presentation constitute forward-looking statements. These
statements relate to future events or our future financial performance and involve known and unknown risks,
uncertainties, and other factors that may cause our or our industry's actual results, levels of activity,
performance or achievements to be materially different from any future results, levels of activities,
performance, or achievements expressed or implied by such forward-looking statements. Actual events or
results may differ materially. Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of activity, performance or
achievements. Factors that could cause actual results to differ materially from those estimated by the
forward-looking statements contained in this presentation include, but are not limited to: trends in wireless
communication and mobile commerce markets; our ability to develop new technology, and the effects of
competing technologies developed and expected intense competition generally in our main markets;
profitability of our expansion strategy; challenges to or loss of our intellectual property rights; our ability to
establish and maintain strategic relationships in our major businesses; our ability to develop and take
advantage of new software and services; and the effect of future acquisitions and investments on our share
price. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness
of such forward-looking statements. The forward-looking statements contained in this presentation speak
only as of this presentation. We are under no duty to update any of the forward-looking statements after this
date to conform such statements to actual results or to reflect the occurrence of anticipated results.
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Investors presentation September 2004
3. Highlights
• Security as key driving force in current environment
• Gemplus is the leader in smart card based technologies and solutions
• Strong momentum in core markets:
−SIM card as core element of wireless ecosystem
−Financial services growth driven by need for secure platforms
−Multiple attractive emerging growth markets in ID & Security
• Strong leadership in place to realize those opportunities
• Strongest balance sheet in our industry
• Profitable growth strategy supported by emphasis on R&D
investment
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Investors presentation September 2004
4. Secured solutions for the real world
Smart cards efficiently procures security, intelligence and
convenience, benefiting to many different markets
Mobile
Telecommunications Banking &
& Public Telephony Retail
Identity
& Privacy management HealthCare
& Access control E-government
Transport Electronic Transactions
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Investors presentation September 2004
5. Gemplus: key enabler of secured platforms
• The Worldwide leader in the smart card industry:
30% market share globally (source: Gartner April 2004)
#1 in shipment and revenue
#1 in SIM revenue
• Revenue €749 m in 2003 (US$846 m), 25% growth in 1st half
2004 vs. 1st half 2003
• Market capitalization: approximately €900 m / US$1.1 bn
• Listed on Euronext Paris and NASDAQ (US-GAAP and IAS/IFRS
compliant)
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Investors presentation September 2004
6. Three Core Markets
Leveraging leading position
to realize opportunities in growth markets
Telecom
Telecom Financial Services
Financial Services ID / Security
ID / Security
(74% of revenues)
(74% of revenues) (21% of revenues)
(21% of revenues) (5% of revenues)
(5% of revenues)
Opportunities: Opportunities: Opportunities:
• Evolving strategic role of the SIM • EMV migration gaining • Emerging high growth
card for telecom operators momentum market
• Increasing SIM penetration • Many evolving projects
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Investors presentation September 2004
7. Our Added Value
• Gemplus provides from smart card components to complete
end-to-end solutions
Solution Discovery Development & Deployment
Smart Cards & Smart Card Interface
Advisory Services
Consulting/ Diagnostic/ Planning Cards Issuance Solutions
Solution Definition/Implementation
Front & Back-end Systems
Training Services
Project Management
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Investors presentation September 2004
8. The SIM Card
A relationship tool
• Over one billion SIM Holders
Migration to high end cards in GSM
W-CDMA in Japan
SIM adoption in Americas
Cellular carriers revenue
M units Sim Subs Non Sims Voice Data
$bn
2500
700
2000 600
500
1500
400
1000
84% 300
500 73% 200
100
0 0
2003 2006 2003 2006
Worldwide Worldwide Annual
+16% Per Year* Av. Growth 03-06:
+10% Per Year*
8 * Source: Gemplus market analysis
Investors presentation September 2004
9. The SIM Card
An asset in the core network
A relatively small investment for the carriers driving tremendous revenue
opportunities
Supports end-user relationship for carriers
The only 100% operator-managed network element in the hands of the end-
user
A response to carriers’ challenges for next generation wireless
Manage the growing complexity of the handset platform
Stimulate the adoption of mobile data services
Strengthen brand awareness
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Investors presentation September 2004
10. The SIM Card
An Incremental Revenue Source for Cellular Carriers
64K 128K 256K
Carrier Admin Files Carrier Admin Files
Carrier Admin Files
Services Access Menus Services Access Menus
Services Access Menus
Phone Book Services Phone Book Sves
Phone Book Services
Roaming Roaming
Roaming
Handset provisioning Handset provisioning
Call completion Call completion
Enterprise Services Enterprise Services
SMS based games SMS Based games
Location Based Sves Location Based Sves
3G Phone Book
Personal Credentials
Quality of Service
The SIM Card facilitates the transition towards data/3G
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Investors presentation September 2004
11. Results improvement driven by migration
to high-end products
70
Mid-range
60
(32Kb)
% Shipments
50
High end
40 (64Kb and above, 3G)
30
20
Low end
10 (8Kb &16Kb)
0
02
02
02
03
03
03
03
04
04
2
3
4
1
2
3
4
1
2
Q
Q
Q
Q
Q
Q
Q
Q
Q
Low end Mid range High-end
• Ongoing migration towards higher-end cards
• High-end cards (64Kb and above, 3G) account now for
11 33.4 % of total shipments (vs. 22.4 % in Q1 04)
Investors presentation September 2004
12. A profitable growth strategy:
Two pronged market approach
• Differentiate in value on high • Run efficiently the commodity
end: segment:
First to market with rapid cycle Improve manufacturing
time utilization
Value added to enable Increase buying power
customer’s differentiation Serve efficiently: providing
Premium on R&D/ innovation competitive costs, on-time
capacities delivery, and high quality
Encouraged long term customer
partnerships
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Investors presentation September 2004
13. Revenue Achievements:
In €m
232.6
210.5
Delivering steady results
154.2
172.4
190.0 197.3
improvement
•Financial result consistently improved last
5 quarters in a row
Q1 Q2 Q3 Q4 Q1 Q2 •Q2 2004:
03 03 03 03 04 04
•Group revenue up 22.1 % year-on-year
Operating Result •Highest gross margin in 3 years: 32.3% (up
(excl. restruct. & goodwill) 1.3 ppt QoQ)
In €m 8.5
4.8 •Operating profit before restructuring and
1.8
0.0 goodwill: €8.5 m (from €4.8 m in Q1 04)
•Net profit: €1.1 m (from €0.3 m in Q1 04)
-13.9
•Strongest balance sheet of the industry:
-27.3
Q1 Q2 Q3 Q4 Q1 Q2
cash position end Q2 04: €383 m
13 03 03 03 03 04 04 (US$463 m)
Investors presentation September 2004
14. Revenue by business segment
232.6
210.5
190.0 197.3
172.4 176.3
In € m 132.3
154.0
124.2 146.6
38.8 47.8 45.2 40.4 44.7
9.4 9.8 11.1 10.3 11.8
Q2 03 Q3 03 Q4 03 Q1 04 Q2 04
ID/ Security Fin. Services Telecom
• Year-on-year change*: Q2 04 Group revenue up 25.0 %
• Telecom up 27.4 %, of which Wireless up 45.5 %
• Financial Services up 16.7 %
• Identity & Security up 26.9 %
• Quarter-on-quarter change*: Q2 04 Group revenue up 4.3 %
• Telecom up 2.6 %
• Financial Services up 8.6 %
14 • Identity & Security up 12.1 %
* After adjusting for currency fluctuations, discontinued operations and acquisitions Investors presentation September 2004
15. New Management leadership (1)
• Alex Mandl (President & CEO since September 2002):
Previously, Chairman & CEO of Teligent, a telecommunication and internet services
company.
AT&T (91-96): President and COO, prior to this, CFO.
Sea-Land Services Inc. (87-91): Chairman and CEO
Board member of Dell Computer Corporation
• Frans Spaargaren (Executive VP & CFO since June 2004):
Philips Electronics: Executive VP of Philips International (01-04), with responsibility for
its joint venture operations (combined revenue of US$10 bn), CFO (98-01) of Philips
Components (€5 bn)
Varta Batteries: various financial and general management positions in the Benelux and
Germany (87-01)
• Jacques Seneca (Executive VP, R&D, ID & Security):
Joined Gemplus in 1989, then held several management positions including General
Manager for the Telecom Division, Executive VP Marketing & Technology, and Head of
R&D.
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Investors presentation September 2004
16. New Management leadership (2)
• Philippe Combes (Executive VP Operations and Financial Services since January
2003):
Philips Electronics (99-02): Chairman & CEO, LG-Philips Displays joint venture (Hong-
Kong), previously, CEO, Display Components Business Group.
Thomson Multimedia (88-99): VP Europe & Asia, Tube Operations ; previously, held
various management positions in manufacturing.
• Philippe Vallée (Executive VP Telecom Business Unit):
Joined Gemplus in 1991, held various management positions including VP, Marketing
and Executive VP, Gemplus Technologies Asia.
Previously, he was with Matra Communication in France.
• Ernie Berger (President, North America since January 2004):
15 years of experience in the financial services sector with American Express and First
USA, where he held senior management positions. More recently, he was instrumental
in the start-up of new business ventures.
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Investors presentation September 2004
17. Summary
• Security as key driving force in current environment
• Gemplus is the leader in smart card based technologies and solutions
• Strong momentum in core markets:
− SIM card as core element of wireless ecosystem
− Financial services growth driven by need for secure platforms
− Multiple attractive emerging growth markets in ID & Security
• Strong leadership in place to realize those opportunities
• Strongest balance sheet in our industry
• Profitable growth strategy supported by emphasis on R&D
investment
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Investors presentation September 2004
18. Appendix
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Investors presentation September 2004
19. What is a contact smart card…
Card body
Micro computer
Module
(contact)
Communication by direct electrical contact with a reader
Two types: Memory or Microprocessor
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Investors presentation September 2004
20. And a contactless smart card?
Card body Card body
(front) (back)
Micro computer
Antenna
Communication with a remote reader
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Investors presentation September 2004
21. Microprocessor smart card:
a computer inside a card
R E
ROM E F
A
CPU M P L
R A
O S
SECURITY M H
• OS: designed by Gemplus / loaded by chip
Operating System manufacturers
+ Applications • CPU: 8-16-32 bit
• ROM code: 50 Kb to 400 Kb
• EEPROM: 1Kb to 256Kb and above
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Investors presentation September 2004
23. Our profitable growth strategy:
Supported by R&D Investment
• Differentiation: high-end solution and services, global offering
Wireless:
3G card efficiency
Over The Air high performance platforms for remote card management
Card issuing and card management flexibility
Financial Services
Multi-applications cards: loyalty
High end personalization solutions
ID: subsystems approach
Combi and contactless cards: security and flexibility (Java based)
Issuing solutions
Cards management system partnerships
• IT: cards and environment
• High end cards (Pki based, contact/contactless)
• Cards Applets
• Readers & middleware
• IP status:
• Gemplus owns 2400 patents
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Investors presentation September 2004
24. R&D highlights
• More than 630 R&D engineers around the world
• 4 Research & Development centers
Organization based on expertise centers:
• Research & Security
• Operating systems Platform
• Product Development Center
And proximity to customers combining R&D and Integration
Services resources
• Europe, Asia-Pacific, China, USA
• An incubation group for emerging market and technologies
• An extra 300 technical consultants throughout the world for integration
and customer support
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Investors presentation September 2004
25. The SIM Card
A Service Enabling Platform: the SIMfrastructure
Manage Complexity Device
• Control support costs Agnostic
• Provide the best user experience Interoperable
• Limit Telco R&D for Handset
Automatic
Stimulate Service Adoption Device
Detection
• Service promotion
• Service discovery
Network
Access
Manage Brand Enabler
• Make service portfolio and brand
visible on any device Secure
• Device personalization Provisioning &
• Non subsidized devices Control
The SIM requires a suite of software in the carrier back-end
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Investors presentation September 2004
26. Share Ownership Structure
26.2% Texas Pacific Group
Free float 39.0%
19.0% Quandt family
Brunei Investment 2.6%
Agency
3.7% 5.4% Dassault Group
General Electric Capital 4.0%
Corporation Raffeisen Centro Bank
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Investors presentation September 2004
27. Board of Directors
Mr. Dominique Vignon (56) Chairman of the Board
Mr. Alex Mandl (60) Chief Executive Officer
Mr. David Bonderman (61) Vice-Chairman of the Board / Managing Partner,
Texas Pacific Group
Mr. William S. Price (48) Managing Director, Texas Pacific Group
Mr. Geoffrey Fink (34) Principal, Texas Pacific Group
Mr. Johannes Fritz (49) Managing Director, Quandt family office
Dr. Peter Kraljic (64) Member of the Mc Kinsey Advisory Council
Mr. Werner Koepf (62) Board member, Marconi Corporation plc
Mr. Daniel Le Gal (53) Partner and Managing Director, Finadvance
Since April/June 2004:
Michel Akkermans (44) Founder and Chairman, Clear2Pay
John Ormerod (55) Former Senior Partner, Deloitte & Touche LLP
Kurt Hellström (60) Former President and CEO of Ericsson
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Investors presentation September 2004