Gemplus Investors 2004

Gemplus
Investors Presentation

Alex Mandl – President & CEO
Frans Spaargaren – Executive Vice-President & CFO
Jacques Seneca – Executive Vice-President R&D, Identity & Security

September 2004

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.

2
Investors presentation September 2004

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

3

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

4

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)
5

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

6

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

7

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

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

9

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
10

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)

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

12

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)

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

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.

15

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.

16

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

17

Appendix

18

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

19

And a contactless smart card?

Card body Card body
(front) (back)

Micro computer

Antenna

Communication with a remote reader

20

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
21

Global reach, local presence

22

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

23

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
24

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
25

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

26

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

27

Gemplus Investors 2004

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