Gemalto First Half 2006 Results

Amsterdam (ots/PRNewswire) -

- Revenue[1] Up 2% at Constant Exchange Rates (-1% at Current
Exchange Rates)

- Operating Margin1 at 3.7%, Reflecting Fierce Competition in
Mobile Communication

- Cash and Cash Equivalents at USD 478 Million

- Continuing Challenging Industry Environment

- Synergies and Long-Term Objectives Confirmed

Gemalto (Euronext NL0000400653 - GTO), a leader in digital
security, today announced its results for the half year ended June
30, 2006.

Highlights of the adjusted pro forma income statement1 (all
figures below are at current exchange rates):

In millions of USD H1 2005 H1 2006 Year-on-year
change
Net sales 1,047.0 1,035.9 -1.1%
Gross profit 342.2 313.7 -8.3%
Gross margin (%) 32.7% 30.3% -2.4 ppts
Operating expenses 266.1 275.0 +3.4%
Operating income 76.1 38.7 -49.1%
Operating margin (%) 7.3% 3.7% -3.6 ppts
Profit for the period 65.3 34.4 -47.3%
Basic earnings per share (USD) 0.67 0.27 -59.5%

The above mentioned adjusted measures exclude business combination
accounting entries, and one-off expenses incurred in connection with
the combination with Gemplus (Nasdaq: GEMP). Gemalto believes these
measures are helpful in understanding its past financial performance
and its future results. Adjusted financial measures are not meant to
be considered in isolation or as a substitute for comparable IFRS
measures, and should be read only in conjunction with the condensed
consolidated interim financial statements prepared in accordance
with IFRS provided in appendix.

Olivier Piou, Chief Executive Officer, commented: "I would like to
thank our shareholders for the outstanding success of the public
exchange offer: it demonstrates their endorsement of our vision to
create a global leader in digital security.

The integration is progressing smoothly and Gemalto is fully
focused on capturing growth opportunities and on realizing the
planned synergies that will both materialize progressively. Our work
since execution of the combination allows us to confirm the synergies
and long term financial objectives previously outlined.

Since the beginning of this year competitive pressure has been
intense. We expect that our market environment will remain
challenging in the coming months and we are adjusting to these
demanding circumstances.

Yet, the simultaneous global spread of communications systems,
mobile personal devices, and the internet, all requiring higher
levels of security, plays well for fully realizing our digital
security vision."

The Company's condensed consolidated interim financial
statements (unaudited) are prepared in accordance with International
Financial Reporting Standard (IFRS).

The pro forma income statement for the first half 2006 has been
prepared assuming that the combination with Gemplus had taken place
as of January 1, 2005, allowing the Group to present it in comparison
with the first half of 2005. The one-off, combination related items
are therefore charged to the first half 2005 pro forma income
statement, so that the first half 2006 income statement only reflects
the recurring intangible asset amortization charges resulting from
the accounting treatment of the transaction, as well as the
additional stock compensation charge arising from it.

Additional financial information on an adjusted pro forma basis is
presented that is not in conformity with IFRS, in particular the
presentation of cost of sales, operating expenses and operating
income, operating margin and earnings per share which exclude charges
arising from the accounting treatment of the combination and one-off
combination related expenses. Charges resulting from the accounting
treatment of the transaction consist of amortization of inventory
step-up, additional stock-based compensation due to the revaluation
of Gemplus' stock options as of combination date, amortization and
impairment of intangible assets. One-off combination related expenses
consist of professional advisory services incurred in connection with
the integration, new Gemalto brand and logo creation and worldwide
registration, as well as impairment charges related to capitalized
development costs on projects which are redundant with existing
products or technologies available in Gemplus. The Company believes
that this information, which is not in conformity with IFRS, is
helpful supplemental information in order to better understand its
past and future performance. In addition, the Company's management
uses this information in its own planning. This information provided
by the Company may not be comparable to similarly titled measures
employed by other companies.

The Company provides reconciliation between pro forma and adjusted
pro forma income statements which is displayed in tables at the end
of this press release. The IFRS consolidated income statement for the
first half 2006 shows operating loss of USD 9.7 million and net loss
of USD 6.4 million, and the pro forma income statement shows
operating income of USD 11.8 million and profit for the period of USD
13.4 million.

For a more detailed description of adjustments made to the IFRS
consolidated income statement, please refer to EXPLANATION OF
ADJUSTED AND PRO FORMA MEASURES at the end of this press release.

All comparisons in this document are at current exchange rates,
unless stated otherwise, and describe the evolution of the adjusted
pro forma first half 2006 information compared to that of the first
half 2005.

As of the third quarter 2006, the Company will adopt the euro
as its reporting currency.

As of the first quarter 2007, the Company will report full
financial results on a quarterly basis.

Adjusted pro forma income statement2 analysis

Extract of the adjusted pro forma income statement[2]:

Six months ended June 30, Six months ended June 30,
2005 2006
USD millions As a % of USD millions As a % of % change
sales sales
Revenue[3] 1,047.0 1,035.9 -1.1%
Gross 342.2 32.7% 313.7 30.3% -8.3%
profit
EBITDA[4] 125.1 11.9% 86.8 8.4% -30.6%
Operating 266.1 25.4% 275.0 26.6% +3.4%
expenses
Operating 76.1 7.3% 38.7 3.7% -49.1%
income
Profit for 65.3 6.2% 34.4 3.3% -47.3%
the period

At constant exchange rates, revenue was up 2%, reflecting varying
performance between market segments. Solid revenue growth in Identity
& Security and Secure Transactions was fully offset by the effect of
strong price pressure on Mobile Communication revenue. After
adjusting for the acquisition of Setec and currency fluctuations,
revenue was down 2 %.

On a geographic basis, revenue was up 3% in Asia, driven by
Identity & Security and Secure Transactions. In EMEA[5], revenue was
almost stable, while in the Americas revenue was down 6%.

Microprocessor card shipments grew 39% to 561 million units,
sustained by strong demand in all core segments.

Gross margin was 30.3% compared to 32.7% a year ago, due to
the lower performance in Mobile Communication.

Overall, operating expenses were up 3.4% including Setec. Research
& engineering and general & administrative expenses were stable,
while sales & marketing expenses were up 5.6%, due to increased field
marketing and customer support resources in the regions.

Consequently, operating income was USD 38.7 million and
operating margin was 3.7%.

Financial income was USD 7.0 million. The effective tax rate for
the period was 25%. As a result, profit for the period was USD 34.4
million.

Balance sheet and pro forma cash flow

Pro forma free cash flow[6] of the period was an outflow USD 90
million. Capital expenditure amounted to USD 50 million and USD 100
million were used by an increase in working capital requirement.
Payments of costs incurred in connection with the preparation and
execution of the combination amounted to approximately USD 14
million.

After the distribution of reserves (USD 212 million) to the
Gemplus shareholders prior to the execution of the first step of the
combination (EUR 0.26 per share), cash and cash equivalents remain
strong at USD 478 million as of June 30, 2006.

Segment information[7]

Mobile Communication performance impacted by strong price pressure

Six months ended June 30, Six months ended June 30,
2005 2006
USD millions As a % of USD millions As a % of % change
revenue revenue
Revenue 672.8 600.8 -10.7%
Gross 259.7 38.6% 200.4 33.3% -22.8%
profit
Operating 164.7 24.5% 162.4 27.0% -1.4%
expenses
Operating 95.0 14.1% 38.0 6.3% -60.0%
income

At constant exchange rates, Mobile Communication revenue was down
9%: the strong volume growth was not sufficient to fully compensate
for extreme price pressure.

SIM cards shipments for the first half 2006 were up 38% to 430
million units, driven by strong demand in Asia and in EMEA. Shipments
in the Americas show limited growth compared with a strong first half
2005.

The average SIM card selling price for the first half 2006 was
down 35% compared to the first half 2005, reflecting the intensified
competitive environment this year. In the first half 2006, the market
was characterized by very strong volume growth in emerging countries
which use a higher proportion of low-end cards, and by delays in
migration to high-end products in other countries.

The average SIM card selling price for the second quarter 2006 was
down 1% at current exchange rates, compared with the first quarter
2006.

Compared with the strong performance of the first half 2005, gross
margin decreased, reflecting the intensified competitive environment
since the beginning of the year.

Secure Transactions (Financial Services and pay-TV)

Six months ended June 30, Six months ended June 30,
2005 2006
USD millions As a % of USD millions As a % of %
revenue revenue change
Revenue[8] 213.9 234.4 +9.6%
Gross 45.4 21.2% 47.7 20.4% +5.1%
profit
Operating 46.4 21.7% 52.6 22.5% +13.4%
expenses
Operating (1.0) -0.5% (4.9) -2.1% NM
income

At constant exchange rates, revenue was up 14%. After adjusting
for the acquisition of Setec and currency fluctuations, revenue was
up 9%.

Microprocessor card shipments for the first half 2006 were up 37%
to 109 million units, driven by on-going EMV[9] deployment,
particularly in Turkey, Latin America, North Asia and Southern
Europe.

Average selling prices decreased reflecting price pressure in
certain markets, as well as a change in the regional mix and a
greater share of modules in the total volume sold.

ID & Security

Six months ended June 30, Six months ended June 30,
2005 2006
USD millions As a % of USD millions As a % of % change
revenue revenue
Revenue[8] 77.0 130.3 +69.2%
Gross 26.4 34.3% 55.4 42.5% +109.8%
profit
Operating 41.3 53.6% 47.9 36.8% +16.0%
expenses
Operating (14.9) -19.3% 7.5 5.7% NM
income

At constant exchange rates, revenue was up 73%, driven by strong
sales of microprocessor card solutions for e-passports, healthcare
and transportation management, as well as by increased IP licensing
activity. After adjusting for the acquisition of Setec and currency
fluctuations, revenue was up 44%.

Microprocessor cards shipments for the first half 2006 were up 58%
to 22 million units, fuelled by initial deployments of large scale
e-passports programs in France and Portugal and by strong
Transportation activity.

During the first half 2006, the Group won several meaningful and
highly visible contracts for e-passport projects in France, the Czech
Republic, Portugal and Slovenia, and healthcare management in France
and Mexico.

Gross margin was up 8.2 percentage points compared with a strong
first half 2005, reflecting high revenue derived from patent
licensing contracts: these are fully offsetting lower margin in the
ID business as the rollout of e-passports in Europe is still in its
early stages.

Public Telephony

Six months ended June 30, Six months ended June 30,
2005 2006
USD millions As a % of USD millions As a % of % change
revenue revenue
Revenue 44.7 40.1 -10.3%
Gross 1.0 2.2% 2.5 6.3% +164.0%
profit
Operating 6.6 14.7% 4.3 10.8% -33.7%
expenses
Operating (5.6) -12.5% (1.8) -4.5% NM
income

Memory cards for Public Telephony now contribute for less than 4%
of Group revenue.

Point-of-Sale Terminals

Six months ended June 30, Six months ended June 30,
2005 2006
USD millions As a % of USD millions As a % of % change
sales sales
Revenue 38.6 30.2 -21.6%
Gross 9.7 25.2% 7.7 25.5% -20.6%
profit
Operating 7.1 18.5% 7.8 25.8% +9.2%
expenses
Operating 2.6 6.7% (0.1) -0.3% NM
income

The activity in this segment reflects a transition period in
advance of the introduction of a new range of products later this
year.

Outlook

Market conditions have been difficult since the beginning of this
year, and the Company expects it will remain challenging,
particularly in light of the uncertainties in the global economic
environment. With synergies from the combination materializing
progressively, in line with plans, and the significant resources
required this year to converge product roadmaps and processes,
Gemalto expects operating performance in the second half 2006 to be
similar to that of the first half.

The deployment of the electronic passport and ID projects won
in recent months will produce their full effect in 2007.

The Group has taken cost reduction measures beyond the initially
identified synergies, and continues to review the adequacy of its
current configuration in light of these circumstances. On August 31,
2006, Gemalto announced consolidation of its two production centres
in Owing Mills and Montgomeryville in the United States into the
latter's facility, which better meets the future needs of its
business strategy and customers.

Given its technology and market leadership, Gemalto is uniquely
positioned to address the increasing need for security in the digital
world. The Company is confident in its ability to play a leading role
in the digital security industry as it expands on a global scale and
to realize its objective for 2009 of a low teens operating margin.

GEMALTO
FIRST HALF 2006 FINANCIAL RESULTS
EXPLANATION OF ADJUSTED AND PRO FORMA MEASURES

Due to the combination with Gemplus, Gemalto's financial
statements have undergone significant change, due in particular to
the accounting treatment of this transaction in accordance with IFRS
3 "Business Combination". To supplement the financial statements
presented on an IFRS basis, the Group presents the pro forma and
adjusted pro forma information described in the table below.

Pro forma measures

The pro forma income statement for the first half 2006 has been
prepared assuming that the combination had taken place as of January
1, 2005, allowing the Group to present it in comparison with the
first half 2005. The one-off, combination related items are therefore
charged to the first half 2005 pro forma income statement, so that
the first half 2006 income statement only reflects the recurring
intangible asset amortization charge resulting from the Purchase
Price Allocation and the additional stock-based compensation charge.

Adjusted measures

Adjusted measures exclude certain business combination accounting
entries, and expenses directly incurred in connection with the
combination with Gemplus, that the Group believes are helpful in
understanding its past financial performance and its future results.
Adjusted financial measures are not meant to be considered in
isolation or as a substitute for comparable IFRS measures, and should
be read only in conjunction with condensed consolidated interim
financial statements prepared in accordance with IFRS. Management
regularly uses these supplemental adjusted financial measures
internally to understand, manage and evaluate the business and take
operating decisions. These adjusted measures are among the primary
factors management uses in planning for and forecasting future
periods. Compensation of executives is based in part on the
performance of the business based on these adjusted measures.
Adjusted financial measures reflect adjustments based on the
following items, as well as the related income tax effect:

- Amortization of inventory step-up: IFRS 3 "Business Combination"
requires Gemalto to value work-in progress and finished goods assumed
in connection with the combination at net realizable value (the
estimated revenue derived from the future sale of these goods less
expected selling cost). Therefore, the value of this inventory in the
books of Gemplus on combination date was adjusted accordingly
(step-up). Thus, subsequent sales of the work-in-progress and
finished products carried in Gemplus' inventory at the time of the
combination generate a lower margin than if they were manufactured
after the acquisition, all other factors being equal. The
amortization expense related to this step up is therefore disclosed
in the income statement under a separate line below Cost of Sales.
The adjustment, eliminating amortization of inventory step-up, is
intended to restore the normal margin of such sales. The Group
believes this adjustment is useful to investors as a measure of the
ongoing performance of its business.

- Additional stock-based compensation charge: As prescribed by
IFRS 2 "Share-based payment" and IFRS 3 "Business Combination",
vested and unvested stock options or awards granted by an acquirer in
exchange for stock options or awards held by employees of the
purchased company, or any substantially equivalent commitment by the
acquirer to assume the obligations of the acquirer with regards to
stock options granted to the latter's employees, as is the case for
Gemalto under the Combination Agreement, shall be considered to be
part of the purchase price for the acquirer, and the fair value (at
the effective date of the acquisition or merger) of the new
(acquirer) awards shall be included in the purchase price. It leads
to increase the compensation charge related to stock-options granted
by Gemplus prior to the acquisition. The adjustment, eliminating the
additional stock-based compensation charge, is intended to reflect
the compensation charge that Gemplus would expense if the company
continued to operate on a standalone basis. The Group believes this
adjustment is useful to investors as a measure of the ongoing
performance of its business.

- Amortization and impairment of intangible assets: amortization
and impairment of intangible assets created as a result of the
combination with Gemplus have been excluded from the adjusted profit
for the period. The Group believes this is useful because, prior to
this combination in the second quarter of fiscal 2006, it did not
incur significant charges of this nature, and the exclusion of this
amount helps investors understand the evolution of IFRS operating
expenses in periods subsequent to the combination with Gemplus.
Investors should note that the use of intangible assets contributed
to revenue earned during the period and will contribute to future
revenue generation and that these amortization expenses will be
recurring.

- Combination related charges: In the last months, Gemalto
incurred material expenses in connection with the combination with
Gemplus, which it would not have otherwise incurred. Combination
related charges consist of professional advisory services incurred in
connection with the integration, new Gemalto brand and logo creation
and worldwide registration, as well as impairment charges related to
capitalized development costs on projects which are redundant with
existing products or technologies available in Gemplus. The Group
expects to continue to incur integration-related professional
services in the coming months. Gemalto also determined that its
investment in a listed company was impaired as a consequence of the
combination with Gemplus. The related impairment charge was recorded
in Financial income (loss) in the period. Gemalto believes it is
useful for investors to understand the effect of these expenses on
its cost structure.

Summary

Gemalto provides three sets of income statements:

- IFRS consolidated income statement, pursuant to its regulatory
obligations

- Pro forma income statement

- Adjusted pro forma income statement

Gemalto IFRS - Includes Gemplus income statement consolidated as
consolidated income from June 2, 2006, date on which the first step of
statement the combination between Gemalto and Gemplus was
executed.
- Includes all charges resulting from the accounting
treatment of the combination (amortization and
impairment of intangible assets, additional
stock-based compensation), and one-off charges
incurred in connection with the combination with
Gemplus (combination related charges), as described
in notes 4 and 5 to the condensed consolidated
interim financial statements attached to this press
release.
Gemalto pro forma - Includes Gemplus income statement for the full
income statement reported period (6 months).
Basis of presentation - Combination assumed to have taken place as of
and assumptions for January 1, 2005.
preparation are
described in note 6 - Consequently, one-off charges incurred in
to the condensed connection with the combination with Gemplus
consolidated interim (combination related charges), as described in note
financial statements, 5 to the condensed consolidated interim financial
which also includes statements, are booked in fiscal year 2005.
the reconciliation of
the pro forma income - Recurring charges resulting from the accounting
statement with the treatment of the combination with Gemplus
consolidated income (amortization of intangible assets, additional
statement stock-based compensation) are booked in fiscal year
2005 and 2006 according to the amortization schedule
set as if the combination had taken place on January
1, 2005.
Gemalto adjusted pro - Includes Gemplus income statement for the full
forma income reported period (6 months).
statement
- Combination assumed to have taken place as of
January 1, 2005.
- Excludes one-off expenses incurred in connection
with the combination with Gemplus (combination
related charges), as described in note 5 to the
condensed consolidated interim financial statements,
and all charges resulting from the accounting
treatment of the transaction.

The first half 2005 and 2006 pro forma income statements
established in accordance with IFRS are included in the condensed
consolidated interim financial statements attached to this press
release.

Conference call

The company has scheduled a conference call for Wednesday,
September 13, 2006 at 3:00 pm CET (2:00 pm GMT and 9:00 am New-York
time). Callers may participate in the live conference call by
dialling:

+44(0)207-138-0816 or +1-718-354-1171 or +33-1-55-17-41-49.

The slide show will be available on the web site at 10:00 CET
(9:00 GMT).

Replays of the conference call will be available approximately 3
hours after the conclusion of the conference call until September 19,
2006 midnight by dialling:

+44(0)207-806-1970 or +1-718-354-11-12 or +33-1-71-23-02-48,
access code: 8442332.

Earnings calendar

Third quarter 2006 revenue is scheduled to be reported on October
26, 2006, before the opening of Euronext Paris.

Corporate Media Relations Corporate Communication
Emmanuelle SABY Rémi CALVET
M.: +33(0)6-09-10-76-10 M.: +33(0)6-22-72-81-58
emmanuelle.saby@gemalto.com remi.calvet@gemalto.com
Investors Relations FINEO
Stéphane BISSEUIL
T.: +33(0)1-55-01-50-97 T.: +33(0)1-56-33-32-31
stephane.bisseuil@gemalto.com

About Gemalto

Gemalto (Euronext NL 0000400653 GTO) is a leader in digital
security with pro forma 2005 annual revenues of US$2.2 billion
(EUR1.7 billion), operations in 120 countries and 11,000 employees
including 1,500 R&D engineers. The company's solutions make personal
digital interactions secure and easy in a world where everything of
value -from money to identities - is represented as information
communicated over networks.

Gemalto thrives on creating and deploying secure platforms,
portable and secure forms of software in highly personal objects like
smart cards, SIMs, e-passports, readers and tokens. More than a
billion people worldwide use the company's products and services for
telecommunications, banking, e-government, identity management,
multimedia digital right management, IT security and other
applications. Gemalto was formed in June 2006 by the combination of
Axalto and Gemplus.

For more information please visit www.gemalto.com

DISCLAIMER

The Gemalto N.V. securities referred to herein issued in
connection with the exchange offer of Gemalto N.V. for the securities
of Gemplus International S.A., and the Gemalto N.V. shares issued in
connection with the reopening of such exchange offer, have not been
(and are not intended to be) registered under the United States
Securities Act of 1933, as amended, (the "Securities Act") and may
not be offered or sold, directly or indirectly, into the United
States except pursuant to an applicable exemption. The Gemalto
securities have been and will be made available within the United
States in connection with the exchange offer pursuant to an exemption
from the registration requirements of the Securities Act.

The exchange offer and its reopening relate to the securities of a
non-US company and are subject to disclosure requirements of a
foreign country that are different from those of the United States.
Financial statements presented have been prepared in accordance with
foreign accounting standards that may not be comparable to the
financial statements of United States companies.

It may be difficult for an investor to enforce its rights and any
claim it may have arising under U.S. federal securities laws, since
Gemalto N.V. and Gemplus International S.A. have their corporate
headquarters outside of the United States, and some or all of their
officers and directors may be residents of foreign countries. An
investor may not be able to sue a foreign company or its officers or
directors in a foreign court for violations of the U.S. securities
laws. It may be difficult to compel a foreign company and its
affiliates to subject themselves to a U.S. court's judgment.

This release does not constitute an offer to purchase or exchange
or the solicitation of an offer to sell or exchange any securities of
Gemalto N.V. or an offer to sell or exchange or the solicitation of
an offer to buy or exchange any securities of Gemplus International
S.A.

Gemplus security holders are strongly advised to read the offering
circular relating to the exchange offer and related exchange offer
materials regarding the transaction (see below), as well as any
amendments and supplements to those documents because they contain
important information.

The exchange offer and its reopening described herein are not (and
are note intended to be) made, directly or indirectly, in or into the
United Kingdom, Italy, the Netherlands, Canada or Japan or in or into
any other jurisdiction in which such offer would be unlawful prior to
the registration or qualification under the laws of such
jurisdiction. Accordingly, persons who come into possession of this
release should inform themselves of and observe these restrictions.

Copies of the free English translation of the joint French
language offering document which has received visa No. 06-252 of July
6, 2006 from the French Autorité des marchés financiers and of the
documents incorporated by reference thereto are available from the
Internet websites of Gemalto N.V. (www.gemalto.com) and of Gemplus
International S.A. (www.gemplus.com) as well as free of charge upon
request to the following: Gemalto N.V.: Koningsgracht Gebouw 1, Joop
Geesinkweg 541-542, 1096 AX Amsterdam, the Netherlands; Gemplus
International S.A.: 46A, avenue J.F. Kennedy, L-1855 Luxembourg,
Grand Duchy of Luxembourg; Mellon Investor Services LLC, U.S.
Exchange Agent: 480 Washington Boulevard, Attn: Information Agent
Group,AIM # 074-2800, Jersey City, New Jersey 07310, Call Toll Free:
1-866-768-4951.

[1] Prepared on an adjusted pro forma basis, reflecting the
combined activity of Gemalto and Gemplus over the whole first half
year, excluding one-off expenses incurred in connection with the
combination with Gemplus and charges resulting from the accounting
treatment of the transaction, and assuming that the combination had
taken place as of January 1, 2005

[2] Prepared on an adjusted pro forma basis, reflecting the
combined activity of Gemalto and Gemplus over the whole first half
year, excluding one-off expenses incurred in connection with the
combination with Gemplus and charges resulting from the accounting
treatment of the transaction, and assuming that the combination had
taken place as of January 1, 2005.

[3] Setec consolidated as of June 1, 2005.

[4] EBITDA is defined as operating income plus depreciation (USD
36.6 million in H1 2006 vs. USD 36.5 million in H1 2005) and
amortization expenses (USD 11.5 million in H1 2006 vs. USD 12.5
million in H1 2005). These amounts exclude amortization and
impairment charges related to the intangibles assets identified
pursuant to IFRS 3 "Business Combination".

[5] Europe, Middle East, Africa

[6] 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 (excluding
acquisitions and financial investments). The pro forma free cash flow
is the combination of Axalto and Gemplus free cash flow for the full
six months ended June 30, 2006.

[7] All segment information provided in this press release is on
an adjusted pro forma basis, reflecting the combined activity of
Gemalto and Gemplus over the whole first half year, excluding one-off
expenses incurred in connection with the combination with Gemplus and
charges resulting from the accounting treatment of the transaction,
and assuming that the combination had taken place as of January 1,
2005.

[8] Compared with the pro forma segment revenue information
reported on July 27, 2006, USD 1.9 million was reclassified from
Secure Transactions to ID & Security.

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

Gemalto IFRS Consolidated income statement
All amounts in USD thousands (except where otherwise stated)
Six months ended June 30
2005 2006 % change
Sales 498,200 578,446 +16.1%
Cost of sales (329,995) (408,372) +23.8%
Amortization of
inventory step-up (5,153) N/M
Gross profit 168,205 164,921 -2.0%
Gross margin 33.8% 28.5%
Operating expenses:
Research and engineering (35,432) (37,397) +5.5%
Sales and marketing (56,554) (70,584) +24.8%
General and administrative (31,070) (38,106) +22.6%
Other income, net 1,914 (2,328) N/M
Combination related
expenses(x) (8,671) N/M
Amortization and
impairment
of intangible assets(xx) (17,521) N/M
Operating income (loss) 47,063 (9,686) N/M
Operating margin 9.4% -1.7%
Financial income
(expenses), net 401 1,320 N/M
Share of profit (losses)
of associates (196) 157 N/M
Profit (loss) before
income tax 47,268 (8,209) N/M
Income tax expense (14,018) 1,848 N/M
Profit (loss) for
the period 33,250 (6,361) N/M
Attributable to:
Equity holders of
the company 31,914 (5,620) N/M
Minority interest 1,336 (741) N/M
Basic earnings (loss)
per share (in USD) 0.79 (0.13) N/M
Diluted earnings (loss)
per share (in USD) 0.77 (0.13) N/M
In thousands :
Basic average number of
shares outstanding 40,440 43,917 +8.6%
Diluted average number
of shares outstanding 41,558 44,796 +7.8%
(x) Combination related expenses: (8,671)
- Integration consultant fees (3,376)
- Gemalto brand and logo creation
and registration (1,111)
- Capitalized costs related to
redundant devlpt. projects (4,184)
(xx) Amortization and impairment
of intangible assets: (17,521)
- Gemplus brand name impairment (12,596)
- Gemplus Customer Relationships (595)
- Gemplus existing Technology (4,330)

Gemalto pro forma income statement
(assuming the combination was executed on January 1, 2005)
All amounts in USD thousands (except where otherwise stated)
Six months ended June 30
2005 2006 % change
Sales 1,046,983 1,035,881 -1.1%
Cost of sales (705,514) (720,383) +2.1%
Amortization of inventory step-up (18,492) 0 -100.0%
Gross profit 322,977 315,498 -2.3%
Gross margin 30.8% 30.5%
Operating expenses:
Research and engineering (72,920) (71,469) -2.0%
Sales and marketing (127,554) (132,360) +3.8%
General and administrative (72,373) (71,596) -1.1%
Other income, net 2,193 (189) N/M
Combination related expenses(x) (10,805) 0 -100.0%
Amortization and impairment of
intangible assets(xx) (43,305) (28,040) -35.2%
Operating income (loss) (1,787) 11,844 N/M
Operating margin -0.2% 1.1%
Financial income (expenses), net 2,680 6,973 +160.2%
Share of profit (losses)
of associates (1,306) 327 N/M
Profit before income tax (413) 19,144 N/M
Income tax expense 6,801 (3,970) N/M
Profit for the period 6,388 15,174 N/M
Attributable to:
Equity holders of the company 10,358 8,739 -15.6%
Minority interest (3,970) 6,435 N/M
Basic earnings per share (in USD) 0.17 0.14 -15.6%
In thousands:
Basic average number of shares
outstanding ('000) 62,425 62,399 -0.0%
(x) Combination related expenses: (10,805) 0
- Integration consultant fees (3,408) 0
- Gemalto brand and logo
creation and registration (1,111) 0
- Capitalized costs related to
redundant devlpt. projects (6,286) 0
(xx) Amortization and impairment
of intangible assets: (43,305) (28,040)
- Gemplus brand name impairment (13,333) 0
- Gemplus Customer Relationships (3,618) (3,385)
- Gemplus existing Technology (26,354) (24,655)

Gemalto adjusted(x) pro forma income statement
(assuming the combination was executed on January 1, 2005)
All amounts in USD thousands (except where otherwise stated)
Six months ended June 30
2005 2006 % change
Sales 1,046,983 1,035,881 -1.1%
Cost of sales (704,794) (722,154) +2.5%
Gross profit 342,189 313,727 -8.3%
Gross margin 32.7% 30.3%
Operating expenses:
Research and engineering (72,623) (72,417) -0.3%
Sales and marketing (124,934) (131,873) +5.6%
General and administrative 70,763) (70,566) -0.3%
Other income, net 2,193 (189) N/M
Operating income 76,062 38,682 -49.1%
Operating margin 7.3% 3.7%
Financial income
(expenses), net 5,102 6,973 +36.7%
Share of profit (losses)
of associates (1,306) 327 N/M
Profit before income tax 79,858 45,982 -42.4%
Income tax expense (14,524) (11,540) -20.5%
Profit for the period 65,334 34,442 -47.3%
Attributable :
Equity holders of
the company 41,803 16,903 -59.6%
Minority interest 23,531 17,539 -25.5%
Basic earnings per
share (in USD) 0.67 0.27 -59.5%
In thousands:
Basic average number of
shares outstanding 62,425 62,399 -0.0%
(x) excluding one-off expenses incurred in connection with the
combination with Gemplus and charges resulting from the
accounting treatment of the transaction

Gemalto adjusted pro forma income statement
(assuming the combination was executed on January 1, 2005)
Reconciliation from pro forma to adjusted pro forma
Six months ended June 30, 2006
All amounts in IFRS Amortization of Additional Combination
US$ thousands inventory stock based related
step-up compensation expenses
Sales 1,035,881
Cost of sales (720,383) 277
Gross profit 315,498 0 277 0
Operating
expenses:
Research and
engineering (71,469) 38 -662
Sales and
marketing (132,360) 487
General and
administrative (71,596) 1030
Other income,
net (189)
Combination
related (x) 0
Amortization
and impairment
of intangible
assets (xx) (28,040)
Operating
income 11,844 0 1,832 (662)
Financial
income
(expenses), net 6,973
Share of profit
(losses) of
associates 327
Profit before
income tax 19,144 0 1,832 (662)
Income tax
expense (3,970) 228
Profit (loss)
for the period 15,174 0 1,832 (434)
Attributable
to:
Equity holders
of the company 8,739 800 (434)
Minority
interest 6,435 1,032

All amounts in US$ Amort. or impairment Adjusted
thousands of intangible assets
Sales 1,035,881
Cost of sales -2048 (722,154)
Gross profit (2,048) 313,727
Operating expenses:
Research and engineering -324 (72,417)
Sales and marketing (131,873)
General and administrative (70,566)
Other income, net (189)
Combination related (x) 0
Amortization and impairment of
intangible assets (xx) 28,040 0
Operating income 25,668 38,682
Financial income (expenses), net 6,973
Share of profit (losses) of
associates 327
Profit before income tax 25,668 45,982
Income tax expense -7798 (11,540)
Profit (loss) for the period 17,870 34,442
Attributable to:
Equity holders of the company 7,798 16,903
Minority interest 10,072 17,539

(assuming the combination was executed on January 1, 2005)
Six months ended June 30, 2005
All amounts in US$ Pro forma Amortization of Additional
thousands inventory stock based
step-up compensation
Sales 1,046,983
Cost of sales (705,514) 1,401
Amortization of
inventory step-up (18,492) 18,492
Gross profit 322,977 18,492 1,401
Operating expenses:
Research and
engineering (72,920) 536
Sales and marketing (127,554) 2,620
General and
administrative (72,373) 1,610
Other income, net 2,193
Combination related(x) (10,805)
Amortization and
impairment of
intangible assets
(xx) (43,305)
Operating income (1,787) 18,492 6,167
Financial income
(expenses), net 2,680
Share of profit
(losses) of
associates (1,306)
Profit before income
tax (413) 18,492 6,167
Income tax expense 6,801 (5,566)
Profit (loss) for
the period 6,388 12,926 6,167
Attributable to:
Equity holders of
the company 10,358 5,641 2,691
Minority interest (3,970) 7,285 3,476
(x) Combination related costs include integration consultant fees and
write-off of capitalized development costs
(xx) Intangible assets identified and recognized in accordance with IFRS
3 Business Combination

All amounts in US$ thousands Combination Amort. or Adjusted pro
related impairment of forma
expenses intangible
assets
Sales 1,046,983
Cost of sales (681) (704,794)
Amortization of inventory
step-up 0
Gross profit 0 (681) 342,189
Operating expenses:
Research and engineering (182) (57) (72,623)
Sales and marketing (124,934)
General and administrative (70,763)
Other income, net 2,193
Combination related (x) 10,805 0
Amortization and impairment of
intangible assets (xx) 43,305 0
Operating income 10,623 42,567 76,062
Financial income (expenses),
net 2,422 5,102
Share of profit (losses) of
associates (1,306)
Profit before income tax 13,045 42,567 79,858
Income tax expense (2,894) (12,865) (14,524)
Profit (loss) for the period 10,151 29,702 65,334
Attributable to:
Equity holders of the company 10,151 12,962 41,803
Minority interest 16,740 23,531
(x) Combination related costs include integration consultant fees and
write-off of capitalized development costs
(xx) Intangible assets identified and recognized in accordance with
IFRS 3 Business Combination

AMSTERDAM, September 13 /PRNewswire/ --

Pro forma cash position variation schedule

In USD millions H1 2005 H1 2006
Beginning net cash(x) as of January 1. 713 745
Cash generated by (used in) operating activities 111 (33)
including decrease of (increase) in working 4 (100)
capital requirement
Capital expenditure and acquisition of (29) (50)
intangibles
Setec acquisition (75)
Other cash generated by investing activities 26 7
Cash used in connection with the combination (14)
Cash generated by (used in) operating and 33 (90)
investing activities
June 2, 2006, distribution to Gemplus (212)
shareholders
Other cash used in financing activities, (9) (5)
excluding proceeds & repayments of borrowings
Other (translation adjustment mainly) (67) 29
Ending net cash(x) as of June 30. 670 467
Current and non-current borrowings, excluding 11
finance lease
Cash & Cash equivalents as of June 30, 2006 478

Pro forma revenue
In USD
millions
Q2 Q2 % % % %
2005 2006 change change H1 2005 H1 2006 change change
at at at at
current constant current constant
exchange exchange exchange exchange
rates rates rates rates
Mobile 358.8 326.0 -9.1% -9% 672.8 600.8 -10.7% -9%
Communication
Secure 118.4 125.0 +5.6% +8% 213.9 234.4 +9.6% +14%
Transactions
ID & Security 47.0 66.9 +42.4% +43% 77.0 130.3 +69.2% +73%
Public 21.1 18.6 -11.4% -12% 44.7 40.1 -10.3% -9%
Telephony
POS Terminals 17.7 13.8 -22.4% -22% 38.6 30.2 -21.6% -17%
Total 562.9 550.3 -2.2% -2% 1,047.0 1,035.9 -1.1% +2%

AMSTERDAM, September 13 /PRNewswire/ --

Compared with the pro forma segment revenue information reported
on July 27, 2006, USD 1.9 million was reclassified from Secure
Transactions to ID & Security

Recurring charges resulting from the accounting treatment of the
combination with Gemplus

In the pro forma
income statements
H1 2005 H1 2006
in USD in EUR in USD in EUR
million million million million
Additional 6.2 4.7 1.8 1.5
stock-based
compensation
resulting
from the
combination
COGS 1.4 1.1 0.3 0.2
R&E 0.5 0.4 0.0 0.0
S&M 2.6 2.0 0.5 0.4
G&A 1.6 1.2 1.0 0.8
Amortization 43.3 32.8 28.0 23.0
and
impairment
of
identified
intangible
assets
recognized
as a
consequence
of the
combination

Forecast
H2 2006 H1 2007 H2 2007 H1 2008 H2 2008 H1 2009 H2 2009 H1 2010
Additional 2.8 1.6 0.6 0.3 (0.0) (0.1) (0.0)
stock-based
compensation
resulting
from the
combination
COGS 0.4 0.2 0.1 0.0 (0.0) (0.0) (0.0)
R&E 0.1 0.0 0.0 0.0 (0.0) (0.0) (0.0)
S&M 0.7 0.4 0.1 0.1 (0.0) (0.0) (0.0)
G&A 1.6 0.9 0.3 0.2 (0.0) (0.0) (0.0)
Amortization 23.0 23.0 23.0 6.5 6.5 6.5 6.5 5.4
and
impairment
of
identified
intangible
assets
recognized
as a
consequence
of the
combination

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

Contact:
Corporate Media Relations, Emmanuelle SABY, M.: +33(0)6-09-10-76-10,
emmanuelle.saby@gemalto.com; Corporate Communication, Rémi CALVET,
M.: +33(0)6-22-72-81-58,remi.calvet@gemalto.com; Investors Relations,
Stéphane BISSEUIL, T.: +33(0)1-55-01-50-97,
stephane.bisseuil@gemalto.com; FINEO, T.: +33(0)1-56-33-32-31