July 28, 2005 01:30 ET

Axalto Second Quarter 2005 Revenue Up 15%

AMSTERDAM--(CCNMatthews - Jul 28, 2005) -


-- Revenue of $261 million

-- Excellent performance in mobile communications: +20%

-- Strong growth in financial cards: +14%

-- Over 110 million microprocessor cards delivered

Axalto (Euronext NL0000400653 - AXL) today reported second quarter 2005 revenue of $260.9 million, a 15% increase compared with $226.9 million second quarter 2004 revenue.

For the first six months of 2005 Axalto posted revenue of $498.2 million, a 16% growth over the $430.3 million revenue recorded in the first half of 2004.

Commenting on these results Olivier Piou, Axalto's Chief Executive Officer said: "Axalto delivers another impressive performance, in highly competitive conditions. Revenue in mobile communications posted further very solid growth, with lower activity in China completely offset by remarkable successes in the Americas, Eastern Europe and Africa. Banking cards sales expanded in all regions. The public sector and access product line revenue was essentially stable, not yet benefiting from the national programs aimed at improving citizens and homeland security. Axalto performance during the first half of the year demonstrated once again the effectiveness of its balanced growth model. We can confidently expect very significant progress in our first-half earnings."

Second quarter 2005
--------------------------- -----------------------------------------
% of the Change at
Axalto Change Quarter's constant
Total exchange
2005 2004 Revenue rates
------ ------
(US$ million)
Mobile Communications 160.4 134.0 20% 61% 17%
Financial Cards 54.6 48.0 14% 21% 9%
Public Sector, Access
and Others 17.6 18.1 (3%) 7% (5%)
Prepaid (memory) Phone
Cards 10.5 10.1 4% 4% 1%
------ ------
Total Cards 243.1 210.2 16% 93% 13%
====== ======
Point-of-sale Terminals 17.7 16.7 6% 7% 1%
====== ======
Total Revenue 260.9 226.9 15% 100% 12%
--------------------------- ------ ------ ------ ---------- ---------

Further strong growth in the Cards segment

Revenue in the Cards segment came to $243.1 million, up 16% compared with the second quarter of last year.

During the period Axalto delivered over 110 million microprocessor cards, a 36% volume growth.

The Americas region took over as the second-largest revenue contributor.

Strong increase in microprocessor cards revenue

Mobile Communications

The Mobile Communications product line revenue exceeded $160 million in the quarter. It posted revenue growth of 20% during the second quarter of 2005, a considerable achievement in light of the very strong comparative base of 2004's second quarter.

This performance was driven primarily by the increase in volumes of SIM cards sold, which topped 84 million units over the quarter, up 47%, and by further improvement in the product mix: the share of high-end SIM cards grew 35% compared with the same period of last year. These gains did largely offset the SIM cards average sales price reduction, which averaged 19% compared with the second quarter of 2004 due to competitive pressure.

Growth in the Europe, Middle East and Africa region came to +15% in the quarter, with very strong sales in Eastern Europe and Africa. Activity in Asia dipped 22% compared with the second quarter of 2004 due primarily to a sizeable decline in revenue recorded in China as a result of the leading local telecommunications operators reorganisations and stronger pricing pressures.

The Americas posted impressive growth, with revenue up 107% compared with the second quarter of the previous year. This remarkable success was driven by a strong increase in the volume of microprocessor cards delivered, and by the considerable improvement in the region's product mix, which now comprises primarily high-end cards.

Financial Cards

Axalto again posted solid expansion in this product line during the second quarter. Revenue was up 14%, at close to $55 million, with all regions progressing.

The volumes of microprocessor cards delivered posted a steep rise of 17%, with over 20 million cards sold in the quarter, while the average selling price of microprocessor cards for banking was essentially stable, up 2%.

Public Sector, Access and Other

Second-quarter 2005 revenue inched down 3% to $17.6 million. The public sector and transport product lines recorded healthy growth despite delays in some national programs to deploy electronic passports and ID cards, and to modernise public administration systems. These gains did almost entirely offset significantly lower sales in the pay TV business, which faced heavy price declines that prompted Axalto to not renew certain contracts.

Memory cards (without a microprocessor) sales

Prepaid Phonecards

The product line's revenue increased by 4% owing in particular to a major contract with a longstanding customer.

Point-of-sale Terminals segment

Revenue in the point-of-sale terminals segment advanced by 6%, to $17.7 million. This performance was driven by market share gains in Europe and India and must be appreciated in the light of the very high comparison basis of 2004' second quarter.

Geographical break-down of revenue

Europe, Middle East,
Second quarter 2005 Africa
----------------------- -------------------------
Segments Revenue
($ million) Change %
----------------------- --------------- ---------
Cards 125.8 +14%
Point-of-sale Terminals 14.4 +6%
----------------------- --------------- ---------
Total 140.2 +13%
----------------------- --------------- ---------
% Region 54%
----------------------- -------------------------

Second quarter 2005 Asia
----------------------- -----------------------
Segments Revenue
($ million) Change %
----------------------- ------------- ---------
Cards 47.0 (20)%
Point-of-sale Terminals 2.8 +28%
----------------------- ------------- ---------
Total 49.8 (18)%
----------------------- ------------- ---------
% Region 19%
----------------------- -----------------------

Second quarter 2005 Americas
----------------------- ----------------------
Segments Revenue
($ million) Change %
----------------------- ------------- --------
Cards 70.3 +71%
Point-of-sale Terminals 0.5 (46%)
----------------------- ------------- --------
Total 70.9 +69%
----------------------- ------------- --------
% Region 27%
----------------------- ----------------------

First-time adoption of IFRS

Axalto published its financial statements for the previous periods in accordance with the Generally Accepted Accounting Principles in the United States of America, the US GAAP standards.

In accordance with European regulation 1606/2002, Axalto adopted the International Financial Reporting Standards, IFRS, effective for the first time on January 1, 2005.

Adoption of IFRS has no impact on Axalto revenue, neither for the year 2004 nor for the year 2005.

To provide you with comprehensive information, Axalto includes in appendix a memorandum describing the effects of the first-time adoption of IFRS on the Group's shareholders' equity and its opening and closing balance sheets for 2004 -- the so-called "transition year" -- as well as the interim and annual statements of operations, and the statement of cash flow for the same year, 2004. The memorandum also includes an estimate of the differences between US GAAP and IFRS on the statement of operations of Axalto for the first half of 2005. We also provide for the opening and closing balance sheets for 2004 and the interim and annual statements of operations detailed reconciliation statements showing the impact of the adoption of IFRS on the accounts and on the key accounting aggregates that were originally prepared in accordance with US GAAP.

Axalto will publish on 8 September its financial statements for the first half of 2005 in accordance with IFRS.

About Axalto

Axalto (AXAL.PA - Euronext: NL0000400653 - AXL) is the world's leading provider (Gartner 2005, Frost & Sullivan 2004) of microprocessor cards - the key to digital networks - and a major supplier of point-of-sale terminals. Its 4,500 employees, from over 60 nationalities, serve customers in more than 100 countries, with worldwide sales reaching over 3 billion smart cards to date. The company has 25 years' experience in smart card innovation and leads its industry in security technology and open systems.

Axalto creates new generations of products for use in a variety of applications in the telecommunications, finance, retail, transport, entertainment, healthcare, personal identification, information technology and public sector markets. Microprocessor cards provide convenience, security and privacy to public and private services operators, their customers and end users. For more information, please visit

Unless stated otherwise, all comparisons in this document are shown on a current exchange rate basis.

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