Gemalto: dim sim

Δημοσιεύθηκε: 22 Φεβρουαρίου 2015 - 21:08

For a company whose business rests on "enabling trust in the digital world", getting hacked is bad news. Yet for Gemalto, the French company that sells Sim cards, payment cards and identity products (think passports), the reports that it might have been hacked by US and UK spy agencies did not have a huge impact on its stock. The share price closed 4 per cent down on Friday.

That is because, hacked or not, shareholders already had a lot to worry about. The share have fallen 14 per cent in the past year. Gemalto's primary business used to be selling Sim cards, but that market has stagnated, and Gemalto's 4G technology is no longer as strongly differentiated as it once was. Gemalto still has about a third of the global Sim card market, and mobile revenues account for just over half of Gemalto's €2.5bn in sales last year. But the company risks sitting on the sidelines of the mobile payment revolution - its technology was not included in ApplePay, for example.

Gemalto is looking for growth in other areas to meet its financial target of €600m in operating profit by 2017 (double the level of 2013). In the near term, the adoption of chip-and-pin payment cards will provide a boost. Already widespread in Europe, these are now being rolled out in the US and Asia - and Gemalto is a big supplier. Moreover the company's identity business (as in ID cards and passports) is growing fast, and will be further helped by its recent acquisition of Trub, a Swiss identity product company. Barclays expects revenues from identity and payment could be more than half of sales for the first time this year.

However, the idea that Gemalto's security is not inviolable will still be costly. This is particularly true in Asia, Gemalto's fastest growing market, and especially in China, where China Mobile (with 800m subscribers) is a customer. China's opportunities are important: Gemalto is even providing high-end Sim cards for the Beijing subway system. Barclays estimates Chinese payment card sales might contribute 7 per cent of Gemalto's revenue growth in 2015. But China has proved quick to punish foreign tech companies that carry any whiff of association with (or, in this case, infiltration by) the US National Security Agency. Gemalto's challenges will grow. Trust is a fragile thing.

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