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Smart Card Companies Slash Jobs

Gemplus will eliminate 1,000 positions and Schlumberger will shed 3,300 employees amid continued weakness in the industry.
By Bob Violino
Dec 11, 2002Dec. 12, 2002 - Analysts keep expecting sales of smart cards to pick up, but so far, the demand hasn't materialized. This week, two of the world's top smart card makers announced sweeping layoffs. Gemplus International will eliminate 1,000 positions and Schlumberger will shed 3,300 employees.

Gemplus has been struggling for more than a year. The company initiated a restructuring program under new CEO Alex Mandl. The latest cuts are part of that ongoing effort, but Mandl told reporters during a conference call that there would be further layoffs in the coming months.

The industry has been hurt by weak demand for smart cards that are used in cell phones and chip cards used in the financial industry. Gemplus has begun moving into RFID smart cards, which don't require contact with a reader. These can be used for payments as well as for access control and security. During the last quarter, Gemplus was awarded a contract to supply more than 1.2 million smart ID cards for a national identity program in the Sultanate of Oman.

Mandl said the plan to reduce the company's workforce by 18 percent would generate savings of more than EUR200 million (US$202 million) in 2004. But he could not say when the company, which posted a net loss of EUR224.11 million (US$226 million) in the first nine months of 2002, would return to profitability.

Gemplus has also been wracked by internal squabbling among board members. Texas Pacific Group, the largest shareholder, supports Mandl and has been trying to push former chairman Marc Lassus off the board (see Turmoil Continues at Gemplus). Board members plan to hold a special meeting on Dec. 19 to try to resolve the dispute.

Schlumberger plans to take $3.17 billion in charges, mostly related to its technology unit, which makes smart cards. Schlumberger bought Anglo-French software firm Sema PLC for $5.2 billion in 2001, when the technology sector was hot. It hoped to offer technology to its oil services clients. But Sema has been hit hard by the sudden downturn in spending on information technology.

Schlumberger says Sema will now focus on IT consulting in Schlumberger's core energy business. The smart cards, telecommunications software and other businesses will be managed separately. Schlumberger expects pretax savings of $250 million a year from the elimination of about 4 percent of its workforce and from closing several facilities.

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