Gemplus Reports Strong Sales Growth for the First Quarter 2006

Luxembourg (ots/PRNewswire) -

First quarter 2006 highlights:

- Net sales up 19.3% year-on-year driven by Financial Services
and ID & Security.

- Gross margin at 30.5%, down 1.6 percentage point year-on-year.

- Operating income up 12.3%, at 8.4 million euros.

- Attributable net income[1] at 6.3 million euros.

Gemplus International S.A. (Euronext: LU0121706294 - GEM and
NASDAQ: GEMP), a world leading provider of secure card solutions,
today reported results for the first quarter ended March 31, 2006.

In millions of euros Q1 2006 Q1 2005 Year-on-year
change
Net sales 230.3 193.1 +19.3%
Adjusted for currency fluctuations, disposals +5.3%
and acquisitions
Gross profit 70.2 61.9 +13.5%
Gross margin 30.5% 32.1% -1.6 ppt
Operating expenses 61.8 54.4 +13.6%
Operating income 8.4 7.5 +12.3%
Operating margin 3.7% 3.9% -0.2 ppt
Attributable net income 6.3 7.2 -13.7%
Free cash flow[2] -13.8 8.8 NM
Cash and cash equivalents 409.9 395.1 +3.7%
Per share data (in euros)
Earnings per share (fully diluted) 0.01 0.01 NM

Note: The consolidated financial statements of the Company have
been prepared in accordance with International Financial Reporting
Standards (IFRS).

Commenting on the performance for the first quarter 2006, Alex
Mandl, President and Chief Executive Officer, said: "Gemplus improved
its position in all of its core businesses. Beside buoyant shipments
in Wireless, we are very satisfied to report robust revenue growth in
Financial Services and ID & Security. These results validate our
strategy and confirm the strong potential of these segments. Finally,
we are optimistic about the outcome of the proposed Gemalto
transaction to create a world-class leader in digital security."

[1] Net income attributable to equity holders of the Company.

[2] Free cash flow is defined as net cash flow from operating
activities less the purchase of property, plant and equipment and
other investments related to the operating cycle (and excluding
acquisitions and financial investments).

First quarter 2006 financial review

- Income statement

First quarter 2006 highlights:

- Net sales up 19.3% year-on-year driven by Financial Services
and ID & Security.

- Gross margin 30.5%, down 1.6 percentage point year-on-year.

- Operating income up 12.3%, at 8.4 million euros.

Net sales were up 19.3% driven by Setec and strong organic
growth in Financial Services and ID & Security.

On a geographical basis, strong demand in all segments led to
adjusted[3] revenue growth of 27.8% in the Americas. Adjusted[3]
revenue in EMEA[4] was up 5.8%, year-on-year, driven by Financial
Services and down 17.5% in Asia, reflecting price pressure in
Wireless.

Gross margin was down 1.6 percentage point year-on-year, to 30.5%,
reflecting the change in the business mix, Wireless price pressure
and purchase accounting.

As a percentage of sales, operating expenses decreased to 26.8%,
compared to 28.2% a year ago, although in value, they increased 13.6%
year-on-year, to 61.8 million euros, mainly due to Setec.

Consequently, operating income was up 12.3%, at 8.4 million euros.

Attributable net income for the first quarter was slightly down
1.0 million euros to 6.3 million euros, mainly due to minority
interests and income tax.

- Balance sheet and cash flow statement

First quarter 2006 highlights:

- Free cash outflow of 13.8 million euros reflecting increase
in working capital.

- Continuous strong cash position, at 409.9 million euros.

Working capital was up 18.6 million euros quarter-on-quarter, but
decreased, as a percentage of sales, to 14% at March 31, 2006,
compared with 16% a year ago.

The Group's cash position remains strong and is down 8.4 million
euros compared to December 31, 2005.

[3] Adjusted for currency fluctuations, disposals & acquisitions

[4] Europe, Middle East and Africa

Segment analysis

- Telecom

First quarter 2006 highlights:

- Record wireless shipments, at 100.6 million units.

- Wireless ASP down 33% year-on-year, currency adjusted.

- Rebound in prepaid phonecards.

In millions of euros Q1 Q1 % change Adjusted(3)
2006 2005 change
(%)
Wireless products & services net sales 134.3 132.7 +1.2%
Wireless gross profit 50.2 51.1 -1.8%
Wireless gross margin 37.4% 38.6% -1.2 ppt
Prepaid phone cards & scratchcards net 14.0 11.6 +21.2%
sales
Prepaid phone cards & scratchcards 1.9 1.2 +60.7%
gross profit
Prepaid phone cards & scratchcards 13.2% 9.9% +3.3 ppts
gross margin
Telecom net sales 148.4 144.3 +2.9% -2.4%
Telecom gross profit 52.1 52.3 -0.4%
Telecom gross margin 35.1% 36.3% -1.2 ppt
Telecom operating expenses 38.3 35.8 +7.0%
As a % of sales 25.8% 24.8% +1.0 ppt
Telecom operating profit 13.7 16.5 -16.4%
Operating margin 9.3% 11.4% -2.1 ppts

Wireless revenue:

- Wireless products & services revenue[5] was up 1.2%
year-on-year (down 3.3%, currency adjusted), to 134.3 million euros.

- Wireless shipments grew 48% year-on-year, to 100.6 million
units, largely driven by emerging countries.

- High-end card shipments (3G and above) accounted for 14% of
the first quarter total, compared to 10% a year ago.

- Wireless average selling price (ASP) was down 16%
quarter-on-quarter and 33% year-on-year, both currency adjusted,
reflecting ongoing price pressure.

The slight decline in Wireless gross margin was due to product
and regional mix, as well as strong price pressure.

[5] Wireless products & services revenue comprises wireless
microprocessor cards and related applications (embedded software and
Over The Air platforms) and services (system integration and operated
services).

- Financial Services

First quarter 2006 highlights:

- Very strong growth in payment microprocessor cards:
shipments up 75%, to 22.3 million units.

- EMV[6] roll-out gained further momentum in Latin America,
Southern Europe and Japan.

In millions of euros Q1 2006 Q1 2005 % change Adjusted(3)
change (%)
Net sales 56.4 37.9 +48.6% +30.0%
Gross profit 10.5 5.8 +80.6%
Gross margin as a % of sales 18.6% 15.3% +3.3 ppts
Operating expenses 11.4 10.4 +9.8%
As a % of sales 20.3% 27.4% -7.1 ppts
Operating income -0.9 -4.6 NM
Operating margin as a % of sales -1.6% -12.1% +10.5 ppts

Revenue reflects strong growth in all sub-segments.

Payment microprocessor card revenue rose 55% year-on-year.
Shipments of payment microprocessor cards grew 75% to 22.3 million
units.

The strong performance in payment cards was mainly driven by the
EMV roll-out, which gained momentum in Latin America (Mexico,
Brazil), Southern Europe (Italy, Portugal, Greece) and Japan.

As a result, operating income came close to breakeven.

- Identity and Security

First quarter 2006 highlights:

- Very strong growth, driven by Government ID and Corporate
Security projects.

In millions of euros Q1 2006 Q1 2005 % change Adjusted(3)
change (%)
Net sales 25.6 10.9 +134.3% +26.0%
Gross profit 7.6 3.8 +102.1%
Gross margin as a % of sales 29.8% 34.6% -4.8 ppts
Operating expenses 12.1 8.2 +47.8%
As a % of sales 47.1% 74.7% -27.6 ppts
Operating income -4.4 -4.4 NM
Operating margin as a % of sales -17.3% -40.1% +22.8 ppts

[6] EMV is a jointly defined set of specifications adopted by
Europay, MasterCard and Visa for the migration of bank cards to smart
card technology.

Strong growth was driven by a substantial increase in Government
ID projects, notably e-passports and healthcare solutions, and
Corporate Security projects, particularly in Americas, in addition to
those from Setec.

Outlook

The Group continues to see strong momentum in its core segments
and will maintain its focus on cost efficiency.

Gemplus confirms that it is firmly on track to realize its
mid-term objective to achieve a 10% operating margin in 2007.

The Group remains confident in its ability to further strongly
improve its operating income in 2006 taking into account the usual
seasonality effect of stronger organic growth in the second half than
in the first half.

Gemplus also continues to expect the Financial Services and ID &
Security segments to turn profitable in 2006.

Business Highlights

- Telecom

At the 3GSM World Congress, Gemplus launched its new software and
SIM platform, bridging telecom and PC/internet communications. Called
.sim (DOTSIM), it extends the traditional SIM roles of authentication
and security from mobile networks to the PC/Internet world and offers
advanced multimedia services across both channels. This is a solution
already generating significant interest from mobile operators such as
Orange, as a way of reinforcing brand, unifying services across the
board and supporting their digital convergence strategy.

Gemplus's OTA over IP platform, GemConnect OTA, was selected by
Telefonica Moviles Expaña for the high speed delivery of multimedia
services and applications for 3G mobile subscribers.

- Financial Services

Gemplus launched its range of innovative card bodies, Plastic
Fantastic, which is designed to help banks and financial institutions
set themselves apart from the competition. The cards range from
unusual shapes, perfumed, tactile and even glow in the dark, and will
support customers in their branding and customer segmentation.

Gemplus' product, GemSense Instant Issuance, also won an award
from the ECPA/ ECR (European Payments Consulting Association /
European Card Review) Payment Innovation Awards in the category for
the most innovative and advanced payment software/hardware product.
This is a personalization and card issuance solution which allows
banks and retailers to deploy or replace cards on the spot. Each
cardholder walks away with a fully personalized smart payment card
within a matter of minutes.

Continuing to support banks in their migration to EMV, Gemplus was
selected by Indonesian Bank, Bank Buana, to provide the highest level
of secure smart payment cards. The cards use random data for the
generation of each signature for transactions which makes them
difficult to duplicate. They also offer off-line transaction
processing capabilities which reduce the cost of network
communication.

- Identity and Security

Gemplus was selected by BearingPoint to supply an additional 1
million cards to the US Department of Defense for their Common Access
Card program. This is the US Federal Government's biggest roll-out to
date with more 4 million smart ID cards issued to bring strong
authentication for its employees. The cards supplied in the contract
are FIPS 140-2 validated - a security pre-requisite for the CAC
program.

Gemplus launched its first product aimed at Small and Medium-sized
enterprises. GemEvidence is a One Time Password token-based solution
which improves the security of remote connections in a cost-effective
manner.

Gemplus, with the full integration of Setec, passed the
significant milestone of half a million e-passports delivered in the
last six months. This makes Gemplus the leading e-passport supplier
in the world.

Gemplus's contactless reader technology, GemProx, was selected and
integrated into Saflink's SureAccess(TM) biometric smart card reader,
designed to comply with the US Government Federal Information
Processing Standard (FIPS) 201 requirements. As such, Gemplus
provides the technology for reading the contactless ID cards carried
by authorized personnel in secure facilities such as seaports and
airports.

Earnings calendar

Second quarter 2006 results are scheduled to be reported on
July 26, 2006, before the opening of Euronext Paris.

Conference Call:

The company has scheduled a conference call for Monday, 24 April
2006 at 2:30 pm CET (1:30 pm GMT and 8:30 am New-York time). Callers
may participate in the live conference call by dialing:

+44-(0)207-138-0813 or +1-718-354-1157 or +33-1-55-17-41-44,
access code 2815143.

The slide show will be available on the web site at 12:30 CET
(11:30 GMT). The webcast will also be available on the IR section of
www.gemplus.com.

Replays of the conference call will be available approximately 3
hours after the conclusion of the conference call until May 8th, 2006
midnight by dialing:

+44-(0)207-806-1970 or +1-718-354-11-12 or +33-1-71-23-02-48,
access Code: 2815143#.

About Gemplus

Gemplus International S.A. (Euronext: LU0121706294 - GEM and
NASDAQ: GEMP) is a world leading player in the secure card industry
in both revenue and total shipments (source: Gartner-Dataquest 2005,
Frost & Sullivan, Datamonitor). It has sold over 5.5 billion smart
cards.

Gemplus delivers a wide range of portable, personalized solutions
in areas including Identity, Mobile Telecommunications, Public
Telephony, Banking, Retail, Transport, Healthcare, WLAN, Pay-TV,
e-government, and access control.

Gemplus' revenue in 2005 was 939 million euros.

www.gemplus.com

For more information:

Press Gemplus Investor Relations
Jane Strachey Gemplus
Tel: +33-(0)4-42-36-46-61 Celine Berthier
Mob: +33-(0)6-79-46-35-93 Tel: +41-(0)-22-544-5054
Email: jane.strachey@gemplus.com Email: celine.berthier@gemplus.com
Edelman
Frédéric Boullard Fineo
Tel: +33-(0)1-56-69-73-95 Tel: +33-(0)1-56-33-32-31
Email:
frederic.boullard@edelman.com Email: investors@gemplus.com

(c)2006 Gemplus. All rights reserved. Gemplus, the Gemplus logo,
are trademarks and service marks of Gemplus S.A. and are registered
in certain countries. All other trademarks and service marks, whether
registered or not in specific countries, are the property of their
respective owners.

Some of the statements contained in this release 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 release include, but are not limited to: trends in
wireless communication and mobile commerce sectors; our ability to
develop new technology, and the effects of competing technologies
developed and expected intense competition generally in our main
segments; 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 release speak only as of this release. 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.

Gemplus International SA
Press Release - Financial statements
For the quarterly period ended March 31, 2006
Consolidated Statements of Income
(in thousands of euros, except shares and per share amounts)
Three months ended
March 31,
2006 2005
(unaudited)
Net sales 230,332 193,102
Cost of sales (160,104) (131,210)
Gross profit 70,228 61,892
Research and development expenses (15,958) (12,981)
Selling and marketing expenses (31,008) (25,707)
General and administrative expenses (15,611) (16,101)
Restructuring reversals 67 438
Other operating income (expense), net 691 (52)
Goodwill amortization and impairment - -
Operating income 8,409 7,489
Financial income (expense), net 2,251 1,795
Share of profit (loss) of associates 120 (824)
Other non-operating income (expense), net (578) 362
Income before taxes 10,202 8,822
Income tax expense (3,119) (1,704)
NET INCOME 7,083 7,118
Attributable to:
Equity holders of the Company 6,252 7,242
Minority interest 831 (124)
Net income per share attributable to equity holders of the Company (in
euros)
Basic 0.01 0.01
Diluted 0.01 0.01
Shares used in net income per share calculation:
Basic 630,137,679 607,039,538
Diluted 649,357,638 622,407,315

Consolidated Balance Sheets

(in thousands of euros)
Mars 31, 2006 December 31, 2005
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents 409,927 418,365
Trade accounts receivable, net 167,115 183,022
Inventory, net 121,394 107,673
Derivative financial instruments 6,296 4,187
Other current receivables 53,759 82,128
Total current assets 758,491 795,375
Non-current assets:
Property, plant and equipment, net 158,237 158,284
Goodwill, net 90,789 90,826
Deferred development costs, net 20,948 21,227
Other intangible assets, net 21,497 23,600
Deferred income tax assets 29,756 32,788
Investments in associates 14,089 16,309
Available-for-sale financial assets, net 2,477 2,469
Other non-current receivables, net 41,360 40,846
Total non-current assets 379,153 386,349
TOTAL ASSETS 1,137,644 1,181,724
LIABILITIES
Current liabilities:
Accounts payable 105,187 106,085
Derivative financial instruments 4,525 2,592
Salaries, wages and related items 45,812 62,641
Current portion of provisions and other 42,528 73,434
liabilities
Current income tax liabilities 4,680 5,228
Other current tax liabilities 20,328 20,821
Current obligations under finance leases 5,383 5,539
Total current liabilities 228,443 276,340
Non-current liabilities:
Non-current obligations under finance 25,052 26,425
leases
Non-current portion of provisions 20,654 23,482
Other non-current liabilities 13,176 13,417
Deferred income tax liabilities 3,520 4,354
Total non-current liabilities 62,402 67,678
Shareholders' equity:
Ordinary shares 133,733 133,466
Additional paid-in capital 1,064,235 1,063,145
Retained earnings (358,775) (365,940)
Other comprehensive income (4,622) (4,407)
Less, cost of treasury shares (1,395) (1,395)
Equity attributable to equity holders of 833,176 824,869
the Company
Minority interest 13,623 12,837
Total shareholders' equity 846,799 837,706
TOTAL LIABILITIES AND SHAREHOLDERS' 1,137,644 1,181,724
EQUITY

Consolidated Statements of Cash Flows

(in thousands of euros)
Three months ended
March 31,
2006 2005
(unaudited)
Cash flow from operating
activities :
Net income (loss) 7,083 7,118
Adjustments to reconcile net
income (loss) to net cash from
operating activities:
Depreciation, amortization and 10,550 9,326
impairment
Changes in non-current portion of (2,612) (446)
provisions and other liabilities,
excluding restructuring
Deferred income taxes (benefit) 1,887 (339)
expense
(Gain) / loss on sale and disposal - 132
of assets
Share of (profit) loss of (50) 824
associates
Share-based compensation 914 805
Other, net 198 (937)
Changes in operating assets and
liabilities:
Trade accounts receivable and 13,706 14,084
related current liabilities
Trade accounts payable and related (2,592) (15,735)
current assets
Inventories (13,970) 8,946
Value-added and income taxes (2,395) 1,354
Salaries, wages and other (17,199) (8,929)
Restructuring reserve payable (1,587) (3,611)
Net cash (used for) from operating (6,067) 12,592
activities
Cash flows from investing
activities:
(Purchase)/Sale of activites net 4,632 -
of cash (acquired)/disposed
Purchase of property, plant and (8,597) (4,439)
equipment
Purchase of other assets (538) (197)
Change in non-trade accounts 1,414 846
payable and other
Net cash used for investing (3,089) (3,790)
activities
Cash flows from financing
activities:
Proceeds from exercise of stock 1,358 -
options
Payments on borrowings (30) -
Principal payments on obligations (1,529) (1,472)
under finance leases
Increase (decrease) in bank (683) (1,555)
overdrafts
Dividends paid by subsidiaries to (270) -
minority shareholders
Changes in non-trade accounts 2,099 779
payables on financing activities
Net cash (used for) from financing 945 (2,248)
activites
Effect of exchange rate changes on (227) 114
cash
Net increase (decrease) in cash (8,211) 6,554
Cash and cash equivalents, 418,365 388,430
beginning of the period
Cash and cash equivalents, end of 409,927 395,098
the period

1) Accounting principles:

The consolidated financial statements of the Company have been
prepared in accordance with International Financial Reporting
Standards (IFRS).

2) Segment information

First Quarter 2006 compared with First Quarter 2005

2.1) Operating Segments

Three months ended (in millions of euros)
Net sales March 31, 2006 March 31, % change Adjusted
2005 change (%)(x)
Telecommunications 148.4 144.3 3% -2%
Financial Services 56.4 37.9 49% 30%
Identity and Security 25.6 10.9 134% 26%
Total 230.3 193.1 19% 5%
(in millions of euros)
Gross profit March (% of net March (% of % change
31, sales) 31, net
2006 2005 sales)
Telecommunications 52.1 35% 52.3 36% 0%
Financial Services 10.5 19% 5.8 15% 81%
Identity and Security 7.6 30% 3.8 35% 102%
Total 70.2 30% 61.9 32% 13%
(in millions of euros)
Operating expenses March (% of net March (% of % change
31, sales) 31, net
2006 2005 sales)
Telecommunications (38.3) 26% (35.8) 25% 7%
Financial Services (11.4) 20% (10.4) 27% 10%
Identity and Security (12.1) 47% (8.2) 75% 48%
Total (61.8) 27% (54.4) 28% 14%
(in millions of euros)
Operating income (loss) March 31, 2006 March 31, 2005 Change in
Operating
income
(loss)
Telecommunications 13.7 16.5 (2.7)
Financial Services (0.9) (4.6) 3.7
Identity and Security (4.4) (4.4) (0.0)
Total 8.4 7.5 0.9
(x) Adjusted for currency fluctuations, disposals & acquisitions
2.2) Geographical Segments
Three months ended (in millions of euros)
Net sales March 31, 2006 March % Adjusted
31, change change
2005 (%) (x)
Europe, Middle East and 121.9 99.3 23% 6%
Africa
Asia 41.3 46.4 -11% -18%
Americas 67.1 47.4 42% 28%
Total 230.3 193.1 19% 5%
(x) Adjusted for currency fluctuations, disposals & acquisitions

ots Originaltext: Gemplus
Im Internet recherchierbar: http://www.presseportal.de

Contact:
Press Gemplus - Jane Strachey, Tel: +33-(0)4-42-36-46-61, Email:
jane.strachey@gemplus.com. Investor Relations, Gemplus - Celine
Berthier, Tel: +41-(0)-22-544-5054, Email:
celine.berthier@gemplus.com