July 21, 2017 / 8:17 PM / a year ago

Gemalto takes another hit from SIM-card, payment issues

(Reuters) - Dutch digital security company Gemalto (GTO.AS) issued its fourth profit warning since October on Friday, citing continued weakness in its SIM-card and U.S. payments operations.

The shadow of an attendee is cast below a logo of Franco-Dutch technology firm Gemalto during a news conference in Paris February 25, 2015. REUTERS/Gonzalo Fuentes

Gemalto’s payments business has been hit by the slow adoption of chip-enabled payment cards in the United States, while its SIM-card business has seen clients delay removable SIM-card purchases as they wait for the next generation of devices with embedded SIMs.

The company said it expects profit from operations for the second half of 2017 to be between 200 million euros ($233.5 million)and 230 million euros.

In April, Gemalto forecast second-half profit from operations of between 300 million euros and 350 million euros.

“The second quarter double digit decline for Payment in Americas and SIM business is anticipated to continue for the rest of the year,” the company said in a statement.

In a bid to adapt to falling demand, Gemalto announced a transition plan in April that aims to add 50 million euros annually to profit from operations.

However, on Friday Gemalto said the plan would only start making a significant contribution towards the end of the year.

Gemalto also said it expects to book a first-half, non-cash goodwill impairment charge of about 420 million euros because of weakness in its removable SIM business.

Based on preliminary results, the company reported a 9 percent drop in revenue to 742 million euros in the second quarter. Profit from operations for the first half of the year came in in line with expectations at around 93 million euros.

Gemalto saw over a billion euros wiped off its market valuation after issuing its second profit warning in March. But the stock has recovered in recent months, buoyed in part by M&A speculation earlier this month.

At Friday’s close, Gemalto shares were trading at 55.04 euros, down 2.4 percent on their value before the company’s first profit warning in October.

($1 = 0.8566 euros)

Reporting by Alan Charlish; editing by Mark Heinrich

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