Gemplus Reports Earnings for the Third Quarter 2006

Luxembourg (ots/PRNewswire) -

Third quarter 2006 highlights:

- Gemalto combination ongoing: tender offer reopened after the
successful first round.

- Gemalto integration process well on-track.

- Net sales down 11.5% mainly due to strong price pressure in
wireless.

- Gross margin at 26.7%, with lower margins in all business
segments.

- Operating loss at 2.7 million euros, including 4.3 million
euros of combination related costs.

Gemplus International S.A. (Euronext: LU0121706294 - GEM and
NASDAQ: GEMP), a world leading provider of secure card solutions,
today reported results for the third quarter ended September 30,
2006.

In millions of euros Q3 2006 Q3 2005 Year-on-year
change
Net sales 219.3 247.9 -11.5%
Adjusted for currency fluctuations, -8.9%
disposals and acquisitions
Gross profit 58.5 82.8 -29.4%
Gross margin 26.7% 33.4% - 6.7 pts
Operating expenses 61.2 61.5 -0.5%
Operating income (loss) -2.7 21.3 NM
Operating margin -1.2% 8.6% -9.8 pts
Attributable net income (loss)[1] -8.0 20.9 NM
Free cash flow[2] 28.0 -20.1 NM
Cash and cash equivalents 234.6 400.8 -41.5%
Per share data (in euros)
Earnings per share (fully diluted) -0.01 0.03 NM

The combination creating Gemalto, a world leader in digital
security, is progressing well: Gemalto owns 94.56% of the share
capital of Gemplus (and 94.68% of the voting rights) since the close
of the first round of the public exchange tender offer filed by
Gemalto for the securities issued by Gemplus. Following this success,
the exchange offer was reopened at the same exchange ratio. It
remains open to allow for an independent expert to assess the
evaluation methodology and price of the sell-out procedure[3].
Gemalto has also indicated its intention to reserve its right to
conduct a squeeze-out, either after the close of the reopened offer
or during the sell-out period which follows the close of the reopened
offer, assuming that more than 95% of the voting rights of Gemplus
are held by Gemalto.

Third quarter 2006 financial review

- Income statement

Third quarter 2006 highlights:

- Net sales down 11.5% (-8.9% currency adjusted) mainly due to
Telecom.

- Gross margin at 26.7%, with lower margins in all business
segments.

- Operating loss at 2.7 million euros, including 4.3 million
euros of combination related costs.

- Attributable net loss at 8.0 million euros.

Revenue in all regions was strongly impacted by the overall weak
performance in Telecom. However, in Asia, strong growth in ID &
Security and Financial Services drove a 5.6% year-on-year adjusted[4]
revenue growth, even with some decrease in Telecom. In EMEA[5],
adjusted[4] net sales were down 10.8% year-on-year, due to lower
sales in Financial Services and in Telecom. In the Americas,
adjusted[4] net sales were down 13.3% year-on-year, notwithstanding
good growth in Financial Services.

Revenue by region

In millions of euros Q3 2006 Q3 2005 % change Adjusted[4]
change (%)
EMEA 118.5 133.3 -11.1% -10.8%
Asia 39.8 39.2 +1.4% +5.6%
Americas 61.0 75.4 -19.1% -13.3%
Total 219.3 247.9 -11.5% -8.9%

As a result, Asia accounted for 18.1% of Group revenue compared
with 15.8% for the third quarter 2005, despite adverse currency
fluctuations. Conversely, the share of the Americas decreased to
27.8%, compared with 30.4%, a year ago.

Despite 3.6 million euros of combination related costs,
operating expenses were flat.

Operating loss was 2.7 million euros, due to lower sales and low
gross margin, in spite of good control of operating expenses.

Each quarter, the Company reassesses the recognition of its
deferred tax assets, which led to an additional income tax charge of
3.2 million euros this quarter.

- Balance sheet and cash flow statement

Third quarter 2006 highlights:

- Free cash flow of 28.0 million euros.

The Group's cash position remains strong at 234.6 million euros,
up 26.3 million euros compared to June 30, 2006. Free cash flow of
28.0 million euros mainly reflects an improvement in working capital
requirement.

Compared to December 31, 2005, cash is down 183.8 million euros,
largely due to a 164.4 million euros outflow related to the
distribution in June 2006 of reserves (share premium) to
shareholders.

Segment analysis

- Telecom

Third quarter 2006 highlights:

- Continued strong demand in wireless: shipments up 32%
year-on-year, to 116 million units, driven by emerging markets.

- Wireless ASP down 35% year-on-year, currency adjusted,
reflecting heavy price pressure.

In millions of euros Q3 Q3 % Adjusted[4]
2006 2005 change change
(%)
Wireless products & services net sales 128.6 154.0 -16.5% -13.8%
Wireless gross profit 42.7 62.3 -31.4%
Wireless gross margin 33.2% 40.4% -7.2 pts
Prepaid phone cards & scratchcards net 11.4 13.5 -16.8%
sales
Prepaid phone cards & scratchcards 1.4 0.9 +53.0%
gross profit
Prepaid phone cards & scratchcards 12.3% 6.7% +5.6 pts
gross margin
Telecom net sales 139.9 167.5 -16.5% -13.6%
Telecom gross profit 44.1 63.2 -30.2%
Telecom gross margin 31.5% 37.7% -6.2 pts
Telecom operating expenses 37.0 37.9 -2.4%
As a % of sales 26.4% 22.6% +3.8 pts
Telecom operating income 7.1 25.3 NM
Operating margin 5.1% 15.1% -10.0 pts

Wireless revenue:

- Wireless products & services revenue[6] was down 16.5%
year-on-year (down 13.8%, currency adjusted), to 128.6 million euros.

- Wireless shipments grew 32% year-on-year, to 116 million units,
largely driven by emerging countries. Volumes were below the Group
expectations due to weaker demand in developed economies.

- High-end card shipments (3G and above) grew 108%. They accounted
for 13% of the third quarter total, compared to 8% a year ago,
despite delays in migration to high-end products at several
customers.

- Wireless average selling price (ASP) was down 10%
quarter-on-quarter and 35% year-on-year, both currency adjusted, due
to heavy price pressure and delays in product mix improvement, as
well as a shift in the regional mix.

The decline in Wireless gross margin mainly reflects strong
price pressure and delays in product mix improvement.

- Financial Services

Third quarter 2006 highlights:

- This quarter shows a pause in EMV[7] deliveries.

In millions of euros Q3 2006 Q3 2005 % change Adjusted[4]
change (%)
Net sales 52.2 58.9 -11.3% -9.6%
Gross profit 8.6 13.7 -37.2%
Gross margin as a % of sales 16.5% 23.3% -6.8 pts
Operating expenses 12.7 13.1 -2.7%
As a % of sales 24.4% 22.2% +2.2 pts
Operating income (loss) -4.1 0.6 NM
Operating margin as a % of sales -7.9% 1.1% -9.0 pts

EMV deliveries show a pause despite accelerating rollouts in Latin
America and in Asia. In total, Gemplus shipped 20.8 million units of
payment microprocessor cards during the third quarter, down 6%
year-on-year, reflecting maturity of certain markets (UK, France,
Turkey) and delays in EMV rollout in Southern Europe and in some
emerging countries. However, shipments are up 24% year-to-date at
63.9 million units.

Payment microprocessor card revenue was down 17% year-on-year and
up 8% year-to-date. Revenue for the third quarter reflects price
pressure in mature markets and a greater share of modules in emerging
countries.

Gross margin was down 6.8 percentage points mainly due to lower
volumes and an unfavourable regional mix in smart payment.

- Identity and Security

Third quarter 2006 highlights:

- Strong growth led by deployment of e-passports.

In millions of euros Q3 2006 Q3 2005 % change Adjusted[4]
change (%)
Net sales 27.2 21.5 +26.4% +29.0%
Gross profit 5.8 5.9 -1.9%
Gross margin as a % of sales 21.3% 27.4% -6.1 pts
Operating expenses 11.4 10.5 +8.5%
As a % of sales 41.9% 48.8% -6.9 pts
Operating income (loss) -5.6 -4.6 NM
Operating margin as a % of sales -20.6% -21.3% +0.7 pt

Growth was driven by Government ID projects, notably the ongoing
deployment of e-passports, including the first deliveries in Poland.
However, revenue does not meet the Group expectations due to
Government ID and Corporate Security projects which did not
materialize as quickly as expected.

Gross margin was down 6.1 percentage points reflecting
industrialization ramp-up and some start-up quality issues.

Year-to-date 2006 financial review (9-months period)

- Net sales up 2.9%, driven by strong growth in ID and
Security.

- Gross margin at 29.8% reflecting strong price pressure in
wireless.

- Operating margin at 3.1%.

In millions of euros YTD 2006 YTD 2005 % change Adjusted[4]
change (%)
Net sales 696.9 677.2 +2.9% -2.2%
Of which Telecom 450.5 474.9 -5.2% -6.4%
Of which Financial Services 163.7 147.1 +11.3% +4.5%
Of which ID & Security 82.8 55.2 +50.0% +16.0%
Gross profit 207.7 224.7 -7.6% NA
Gross margin 29.8% 33.2% -3.4 pts NA
Operating expenses 186.2 173.5 +7.3% NA
As a % of sales 26.7% 25.6% +1.1 pt NA
Operating income 21.5 51.1 -58.0%
Operating margin 3.1% 7.6% -4.5 pts NA
Attributable net income 13.4 49.9 -73.1%

Sales in the first nine months 2006 was down 2.2% adjusted[4], due
to Telecom, despite strong growth in ID and Security and sustained
demand in Financial Services.

On a geographical basis, ID and Security and Financial Services
drove a 4.6% adjusted[4] revenue growth in the Americas. Adjusted[4]
revenue was down 4.3% in Asia, and 5.2% in EMEA, due to Telecom.

Gross margin decrease was due to strong price pressure in
wireless, a shift in the business mix, and Setec purchase accounting,
in spite of the reversal of a provision for a patent claim for a
total amount of 9 million euros.

Operating expenses were stable excluding the 3.6 million euros
combination related costs booked this year, the reversal of a 5.2
million euros litigation provision booked last year, and the impact
of the Setec acquisition.

Due to the lower gross margin and notwithstanding good control of
operating expenses, operating margin was 3.1%.

Creation of Gemalto

On June 2, 2006, Axalto and Gemplus announced a major step of
their combination project to create Gemalto. The contribution in
kind, by Texas Pacific Group and the Quandt family entities, of their
interests in Gemplus International S.A. (in aggregate 43.6% of
Gemplus share capital) to Axalto Holding N.V. was completed on the
basis of 2 Axalto shares for every 25 Gemplus shares. On the same
day, Axalto Holding N.V., renamed Gemalto N.V., filed a public
exchange tender offer for the remaining shares and warrants issued by
Gemplus. Prior to the contribution in kind, Gemplus had initiated the
distribution of reserves (share premium) of EUR0.26 per share to all
of its shareholders on record upon market close of the same day.

On July 6, 2006, the offering document filed by Gemalto received
the visa No. 06-252 from the "Autorité des Marchés Financiers" (AMF)
in Paris, the French stock market authority.

Gemalto owns 94.56% of the share capital and 94.68% of the voting
rights of Gemplus since the close of the first round of the public
exchange tender offer initiated by Gemalto for the shares and
warrants issued by Gemplus.

The exchange offer was reopened on September 12, 2006, at the same
exchange ratio of 2 Gemalto shares for every 25 Gemplus shares. It
remains open to allow for an independent expert to assess the
evaluation methodology and price of the sell-out procedure. Such
sell-out price will be communicated to the market immediately after
completion of the independent expert's assessment.

Gemalto has also indicated its intention to reserve its right to
conduct a squeeze-out, either after the close of the reopened offer
or during the sell-out period which follows the close of the reopened
offer, assuming that Gemalto holds more than 95% of the voting rights
of Gemplus.

More information is available at: www.gemalto.com.

This communication does not constitute an offer to purchase or
exchange or the solicitation of an offer to sell or exchange any
securities of Gemalto or an offer to sell or exchange or the
solicitation of an offer to buy or exchange any securities of
Gemplus.

The exchange offer described above will not be made, directly or
indirectly, in or into the United Kingdom, Italy, Netherlands,
Canada, Australia, or Japan or in or into any other jurisdiction in
which such offer, solicitation, sale or exchange would be unlawful
prior to the registration or qualification under the laws of such
jurisdiction. Accordingly, persons who come into possession of this
communication should inform themselves of and observe these
restrictions.

You are strongly advised to read the offering circular relating to
the exchange offer and related exchange offer materials regarding the
transaction, as well as any amendments and supplements to those
documents because they will contain important information. The
prospectus/offer to exchange and the other documents are available
are available from the Internet websites of the AMF
(www.amf-france.org), of Gemalto N.V. (www.gemalto.com) and of
Gemplus International S.A. (www.gemplus.com). You can obtain a free
paper copy of the prospectus/offer to exchange and other related
documents filed by Gemalto (ex-Axalto) upon request to the following:

- Gemalto N.V.: Koningsgracht Gebouw 1, Joop Geesinkweg 541-542,
1096 AX Amsterdam, the Netherlands.

- Axalto International S.A.S: 6 rue de la Verrerie, 92190, Meudon,
France.

- Deutsche Bank: 3 avenue de Friedland, 75008, Paris, France.

- Gemplus International S.A.: 46A, avenue J.F. Kennedy, L-1855
Luxembourg, Grand Duchy of Luxembourg.

US investors can obtain a copy of the US prospectus/offer to
exchange and related offer materials from Mellon Investors Services
LLC by telephoning to: +1-866-768-4951 (Call Toll Free) or:
+1-201-680-6590 (Call Collect).

Notice to US investors

Any solicitation of offers to buy any Gemplus shares in the United
States in the exchange offer will only be made pursuant to a
prospectus/offer to exchange and related offer materials that Gemalto
will make available to holders of Gemplus securities. Investors and
security holders are strongly advised to read the prospectus/offer to
exchange and related exchange offer materials, as well as any
amendments and supplements to those documents because they will
contain important information.

The Gemalto securities referred to herein that will be issued in
connection with the exchange offer have not been, and are not
intended to be, registered under the U.S. Securities Act of 1933 (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 are intended to 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 will relate to the securities of a non-U.S.
company and will be subject to disclosure requirements of a foreign
country that are different from those of the United States. Financial
statements included in the prospectus/offer to exchange will be
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 you to enforce your rights and any claim
you may have arising under U.S. federal securities laws, since
Gemalto and Gemplus have their corporate headquarters outside of the
United States, and some or all of their officers and directors may be
residents of foreign countries. You 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.

Earnings calendar

Fourth quarter 2006 revenues are scheduled to be reported on
February 1st, 2007, before the opening of Euronext Paris.

The schedule for the announcement of fourth quarter 2006
results will be communicated on February 1st, 2007.

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, Frost
& Sullivan, Datamonitor).

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

Gemplus's revenue in 2005 was 939 million euros.

In June 2006, Gemplus and Axalto initiated their combination to
form Gemalto, a leader in digital security. Gemalto owns 94.56% of
the share capital of Gemplus (and 94.68% of the voting rights) since
close of the first round of the public exchange tender offer filed by
Gemalto for the securities issued by Gemplus.

www.gemplus.com www.gemalto.com

For more information:

Press Gemplus Investor Relations
Remi Calvet Gemplus
Tel: +33-6-22-72-81-58 Céline Berthier
Email: remi.calvet@gemplus.com Tel: +41-(0)-22-544-5054
Email: celine.berthier@gemplus.com
Fineo
Tel: +33-(0)-1-56-33-32-31
Email: gemplus@fineo.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;
changes in our operations and the market for our products arising
from our business combination with Gemalto N.V.; 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.

References:

[1] Net income (loss) attributable to equity holders

[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 (excluding
acquisitions and financial investments).

[3] Right of then remaining Gemplus shareholders to sell their
Gemplus shares to Gemalto for three months after the end of the
current re-opended exchange offer period.

[4] After adjusting for currency fluctuations, acquisitions and
disposals.

[5] Europe, Middle East, Africa

[6] 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).

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

Gemplus International SA
Press Release - Financial statements
For the quarterly period ended September 30, 2006
Consolidated Statements of Income
(in thousands of euros, except shares and per
share amounts)
Three months ended Nine months ended
September 30, September 30,
2006 2005 2006 2005
(unaudited) (unaudited)
Net sales 219,321 247,912 696,919 677,172
Cost of sales (160,853) (165,153) (489,219) (452,492)
Gross Profit 58,468 82,759 207,700 224,680
Research and (16,440) (14,984) (48,584) (44,387)
development
expenses
Selling and (27,756) (30,455) (90,048) (84,377)
marketing
expenses*
General and (17,119) (16,943) (49,505) (45,860)
administrative
expenses*
Restructuring 3 606 474 1522
expenses
Other 123 279 1450 (439)
operating
income
(expense), net
Goodwill - - - -
amortization
and impairment
Operating (2,721) 21,262 21,487 51,139
income
Financial 1,057 1,894 5,608 5,370
income
(expense), net
Share of 425 (360) 488 (1193)
profit (loss)
of associates
Other (1,280) (27) (1,427) 71
non-operating
income
(expense), net
Income before (2,519) 22,769 26,156 55,387
taxes
Income tax (5,240) (1,457) (11,978) (4,403)
expense
NET INCOME (7,759) 21,312 14,178 50,984
Attributable
to:
Equity holders (7,970) 20,873 13,375 49,876
of the Company
Minority 211 439 803 1108
interest
Net income per share
attributable to equity
holders of the Company (in
euros)
Basic (0.01) 0.03 0.03 0.08
Diluted (0.01) 0.03 0.03 0.08
Shares used in
net income per
share
calculation:
Basic 632,708,693 627,085,562 631,391,381 615,046,595
Diluted 632,708,693 645,019,286 647,447,922 630,519,467

Due to the adoption of IAS 1 (revised 2003) Presentation of Financial
Statements, the Company has modified its Consolidated Balance Sheet and
its Consolidated Statement of Income.
Please refer to Note 2.23 "Comparatives" of our 2005 Annual Report for
further details.
* Provisions for bad debt have been reclassified from general &
administrative expenses to selling & marketing expenses as of
January 1, 2006
The 2005 operating expenses displayed in the table above have been
restated in order to be fully comparable to those of 2006.
This restatement does not change the operating income

Consolidated Balance Sheets

(in thousands of euros)
September December 31,
30, 2006 2005
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents 234,572 418,365
Trade accounts receivable, net 179,946 183,022
Inventory, net 126,985 107,673
Derivative financial instruments 4,202 4,187
Other current receivables 47,587 82,128
Total current assets 593,292 795,375
Non-current assets:
Property, plant and equipment, net 165,843 158,284
Goodwill, net 92,079 90,826
Deferred development costs, net 21,419 21,227
Other intangible assets, net 16,178 23,600
Deferred income tax assets 22,578 32,788
Investments in associates 14,008 16,309
Available-for-sale financial assets, net 2,273 2,469
Other non-current receivables, net 45,196 40,846
Total non-current assets 379,574 386,349
TOTAL ASSETS 972,866 1,181,724
LIABILITIES
Current liabilities:
Accounts payable 110,433 106,085
Derivative financial instruments - 2,592
Salaries, wages and related items 46,635 62,641
Current portion of provisions and other 44,713 73,434
liabilities
Current income tax liabilities 3,544 5,228
Other current tax liabilities 19,968 20,821
Current obligations under finance leases 5,416 5,539
Total current liabilities 230,709 276,340
Non-current liabilities:
Non-current obligations under finance leases 22,333 26,425
Non-current portion of provisions 15,859 23,482
Other non-current liabilities 12,133 13,417
Deferred income tax liabilities 1,986 4,354
Total non-current liabilities 52,311 67,678
Shareholders' equity:
Ordinary shares 134,181 133,466
Additional paid-in capital 904,185 1,063,145
Retained earnings (349,816) (365,940)
Other comprehensive income (9,796) (4,407)
Less, cost of treasury shares (1,395) (1,395)
Equity attributable to equity holders of the 677,359 824,869
Company
Minority interest 12,487 12,837
Total shareholders' equity 689,846 837,706
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 972,866 1,181,724
Due to the adoption of IAS 1 (revised 2003) Presentation of Financial
Statements, the Company has modified its Consolidated Balance Sheet and
its Consolidated Statement of Income.
Please refer to Note 2.23 "Comparatives" of our 2005 Annual Report for
further details.

Consolidated Statements of Cash Flows

(in thousands of euros)
Nine months ended
September 30,
2006 2005
(unaudited)
Cash flows from operating activities:
Net income 14,178 50,984
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation, amortization and impairment 31,514 30,035
Changes in non-current portion of provisions and (7,499) (292)
other liabilities, excluding restructuring
Deferred income taxes 6,947 (1,559)
(Gain) / loss on sale and disposal of assets - (3,648)
Share of (profit) loss of associates (195) ,877
Share-based compensation 2,750 2,498
Other, net (220) (4,516)
Changes in operating assets and liabilities:
Trade accounts receivable and related current (2,413) (2,626)
liabilities
Trade accounts payable and related current assets (2,282) 8,619
Inventories (21,177) 9,390
Value-added and income taxes (845) 145
Salaries, wages and other (9,968) (9,335)
Restricted cash 5,775 23,277
Restructuring reserve payable (2,606) (12,206)
Litigation expense payable
Management severance expense
Provision for a loan to a former director and
executive
Net cash (used for) from operating activities 13,959 91,643
Cash flows from investing activities:
Sale / (Purchase) of activities net of cash 4,632 (63,401)
disposed / acquired
Other investments (2,570) (1,463)
Purchase of property, plant and equipment (34,068) (17,754)
Purchase of other assets (1,257) (1,125)
Proceeds from sale of non-current assets - 4,803
Change in non-trade accounts payable and other 1,238 3,299
Net cash used for investing activities (32,025) (75,641)
Cash flows from financing activities:
Proceeds from exercise of share options 6,152 1,817
Payments on long-term borrowings (90) (176)
Proceeds from sales-leaseback operations -
Principal payments on obligations under finance (4,215) (4,441)
leases
Increase (decrease) in bank overdrafts (979) (551)
Dividends paid by subsidiaries to minority (1,881) (1,307)
shareholders
Changes in non-trade accounts payables on 286 347
financing activities
Change in treasury shares -
Interests receivable on loans to senior management -
Cash paid to Shareholders (164,396)
Net cash (used for) from financing activites (165,123) (4,311)
Effect of exchange rate changes on cash (604) 705
Net increase (decrease) in cash and cash (183,189) 11,691
equivalents
Cash and cash equivalents, beginning of the period 418,365 388,430
Cash and cash equivalents, end of the period 234,572 400,826

1) Accounting principles:

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

2) Segment information

2.1) Third Quarter 2006 compared with Third Quarter 2005

2.1.1) Operating Segments

Three months ended (in millions of euros)
Net sales September 30, September % Adjusted
2006 30, 2005 change change
(%) (*)
Telecommunications 139.9 167.5 -16% -14%
Financial Services 52.2 58.9 -11% -10%
Identity and Security 27.2 21.5 26% 29%
Total 219.3 247.9 -12% -9%
(in millions of euros)
Gross profit September (% of net September (% of % change
30, 2006 sales) 30, 2005 net
sales)
Telecommunications 44.1 32% 63.2 38% -30%
Financial Services 8.6 16% 13.7 23% -37%
Identity and Security 5.8 21% 5.9 27% -2%
Total 58.5 27% 82.8 33% -29%
(in millions of euros)
Operating expenses September (% of net September (% of % change
30, 2006 sales) 30, 2005 net
sales)
Telecommunications (37.0) 26% (37.9) 23% -2%
Financial Services (12.7) 24% (13.1) 22% -3%
Identity and Security (11.4) 42% (10.5) 49% 8%
Total (61.2) 28% (61.5) 25% 0%
(in millions of euros)
Operating income (loss) September 30, September 30, Change in
2006 2005 Operating
income
(loss)
Telecommunications 7.1 25.3 (18.2)
Financial Services (4.1) 0.6 (4.7)
Identity and Security (5.6) (4.6) (1.0)
Total -2.7 21.3 -23.9
(*) Adjusted for currency fluctuations, disposals & acquisitions

2.1.2) Geographical Segments

Three months ended (in millions of euros)
Net sales September 30, 2006 September % change Adjusted
30, 2005 change
(%) (*)
Europe, Middle East and 118.5 133.3 -11% -11%
Africa
Asia 39.8 39.2 1% 6%
Americas 61.0 75.4 -19% -13%
Total 219.3 247.9 -12% -9%

2.2) Nine months 2006 compared with nine months 2005

2.2.1) Operating Segments

9 months ended (in millions of euros)
Net sales September 30, September % Adjusted
2006 30, 2005 change change
(%) (*)
Telecommunications 450.5 474.9 -5% -6%
Financial Services 163.7 147.1 11% 5%
Identity and Security 82.8 55.2 50% 16%
Total 696.9 677.2 3% -2%
(in millions of euros)
Gross profit September (% of net September (% of % change
30, 2006 sales) 30, 2005 net
sales)
Telecommunications 155.1 34% 176.9 37% -12%
Financial Services 31.1 19% 29.7 20% 5%
Identity and Security 21.5 26% 18.1 33% 19%
Total 207.7 30% 224.7 33% -8%
(in millions of euros)
Operating expenses September (% of net September (% of % change
30, 2006 sales) 30, 2005 net
sales)
Telecommunications (113.9) 25% (114.1) 24% 0%
Financial Services (36.4) 22% (30.7) 21% 19%
Identity and Security (35.8) 43% (28.7) 52% 25%
Total (186.2) 27% (173.5) 26% 7%
(in millions of euros)
Operating income (loss) September 30, September 30, Change in
2006 2005 Operating
income
(loss)
Telecommunications 41.2 62.8 (21.6)
Financial Services (5.3) (1.1) (4.2)
Identity and Security (14.3) (10.6) (3.7)
Total 21.5 51.1 -29.5
(*) Adjusted for currency fluctuations, disposals & acquisitions

2.2.2) Geographical Segments

9 months ended (in millions of euros)
Net sales September 30, September % change Adjusted
2006 30, 2005 change
(%) (*)
Europe, Middle East and 363.2 353.6 3% -5%
Africa
Asia 124.0 127.2 -2% -4%
Americas 209.7 196.4 7% 5%
Total 696.9 677.2 3% -2%

ots Originaltext: Gemplus
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Contact:
Press Gemplus: Remi Calvet, Tel: +33-6-22-72-81-58, Email:
remi.calvet@gemplus.com