SCM Microsystems Reports First Quarter 2005 Results FREMONT,
Calif., May 11 /PRNewswire-FirstCall/ -- SCM Microsystems, Inc.
(Nasdaq: SCMM; Prime Standard: SMY), a leading provider of
solutions that open the Digital World, today announced results for
the first quarter ended March 31, 2005. Revenues in the first
quarter of 2005 were $10.8 million, within the range of management
guidance of $8 million to $11 million. This compares with revenues
of $13.2 million in the first quarter of 2004. By product segment,
first quarter 2005 revenues included $4.0 million from sales of
Digital TV security modules, $5.0 million from sales of smart card
readers and other products for PC and network security, and $1.7
million from sales of OEM flash media reader technology. Gross
margin in the first quarter of 2005 was 34%, which was below the
range of management guidance of 38% to 41% and reflected additional
net inventory reserve provisions of $0.7 million, primarily related
to the Company's Digital TV and PC Security products. Operating
expenses in the first quarter of 2005 were $7.7 million, including
amortization of intangibles of $0.2 million and restructuring and
infrequent charges of $0.2 million. This represents a decrease of
17% from expenses of $9.3 million in the first quarter of 2004,
which included $0.4 million of charges for amortization,
restructuring and other items. Operating loss for the quarter was
$(4.1) million, compared with operating loss of $(3.9) million in
the year ago quarter. Loss from continuing operations for the first
quarter of 2005 was $(2.8) million, or $(0.18) per share, compared
with net loss of $(3.6) million, or $(0.23) per share, in the first
quarter of 2004. Balance Sheet Cash, cash equivalents and
short-term investments at the end of the first quarter of 2005 were
$44.0 million, compared with $46.2 million at December 31, 2004.
Business and Market Highlights During the Quarter During the first
quarter of 2005, SCM's achievements included: -- Certification of
the Company's DVB conditional TV modules for secure digital TV
broadcast decryption by Swedish digital terrestrial TV operator
BOXER-TV ACCESS, and the shipment to distributors of the first
10,000 modules for BOXER; -- Selection by Jeju Broadcasting of
South Korea to provide 100,000 of the Company's OpenCable(TM)
CableCARD(TM) modules for Jeju's rollout of digital television
pay-TV services to its subscribers; -- Certification of the
Company's e-20 personal smart card reader for financial
applications by MasterCard International, making it possible for
financial institutions and other card issuers to use SCM's mobile
reader with the popular MasterCard OneSMART(TM) Chip Authentication
Program; -- Entry into an agreement with a.trust, an Austrian
accredited trust center, to supply the Company's smart card readers
designed to enable the use of digital signatures on the new
Maestro(R) debit card, which is currently expected to be activated
and utilized for secure online transactions by 800,000 users by the
end of 2007; and -- Receipt of the prestigious Frost & Sullivan
Technology Leadership Award for 2004 for the Company's conditional
access modules, for pioneering innovations in the world pay-TV
equipment market. In addition, the Company announced or introduced
several new products, including: -- A new smart card terminal
designed to read the new German electronic healthcard, which is
currently expected to be distributed to more than 60 million German
citizens by the end of 2006; -- The SDI 010 secure dual interface
reader that combines contact and contactless interface capabilities
to support the growing demand for badging and other personal
identification applications utilizing contactless smart cards; and
-- New CHIPDRIVE(R) productivity solutions for time recording and
password/ID management in the small office/home office environment.
Robert Schneider, chief executive officer of SCM Microsystems
commented, "We continue to work to bring to market new products
that seek to address emerging opportunities and to press forward in
our efforts to enter new markets. We are encouraged by our progress
to date. We have signed agreements with three operators in South
Korea to provide our CableCARD modules for secure access to digital
pay-TV broadcasts; we have formed close alliances with customers,
distributors and partners around the world to deploy our smart card
readers for personal ID programs in the enterprise, healthcare and
financial sectors; and we continue to work with systems integration
partners to supply our readers for various U.S. government smart
card-based security projects." For the second quarter of 2005,
management estimates that revenues will be in the range of $8
million to $12 million, reflecting continued pressure on sales of
Digital TV products in Europe and a lack of visibility into the
timing of anticipated digital security projects in the U.S. and
Europe. Gross margin is expected to be between 38% and 41%. Within
this range of revenue and gross margin, SCM expects to record an
operating loss in the second quarter of 2005. SCM does not plan to
hold a conference call or webcast to discuss the results of its
2005 first quarter. For more information on SCM's first quarter
results, please see the Company's Quarterly Report on Form 10-Q for
quarter ended March 31, 2005, filed with the U.S. Securities and
Exchange Commission. NOTE: The unaudited financial results
contained within this release for the first quarter ended March 31,
2005 reflect continuing operations for the Company's Security
business only, as SCM sold its retail Dazzle(TM)-branded digital
media and video business in July of 2003. SCM's continuing Security
business is focused on enabling secure access to digital content
and services through the digital television and PC platforms.
Financial results for the retail digital media and video business
are being treated as discontinued operations. About SCM
Microsystems SCM Microsystems is a leading supplier of solutions
that open the Digital World by enabling people to conveniently
access digital content and services. The company develops, markets
and sells its smart card reader technology for PC, network and
physical access and conditional access modules for secure digital
TV decryption to OEM customers in the government, financial,
enterprise and broadcasting markets worldwide. Global headquarters
are in Fremont, California, with European headquarters in Ismaning,
Germany. For additional information, visit the SCM Microsystems web
site at http://www.scmmicro.com/. NOTE: This press release contains
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These statements are
subject to risks and uncertainties which may cause actual results
to differ materially from those contemplated herein. These include,
without limitation, our statements regarding our expectations for
revenues, gross margin and operating performance in the second
quarter of 2005. Actual results could differ materially. Our
financial results may not meet expectations. Other risks and
uncertainties that could cause our actual business and operating
results to differ include, but are not limited to our ability to
grow based on a strategy of participating in multiple early stage
markets; our ability to successfully develop and introduce new
products that satisfy the evolving and increasingly complex
requirements of customers; the markets in which we participate or
target may not grow, converge or standardize at anticipated rates
or at all; we may not successfully compete in the markets in which
we participate or target; and competitors could take market share
or create pricing pressure. For a discussion of further risks and
uncertainties related to our business, please refer to our public
company reports, including our Annual Report on Form 10-K for the
year ended December 31, 2004 and our Quarterly Report on Form 10-Q
for the quarter ended March 31, 2005, both filed with the U.S.
Securities and Exchange Commission. NOTE: All trade names are
trademarks or registered trademarks of their respective holders.
SCM MICROSYSTEMS, INC. Condensed Consolidated Statements of
Operations (in thousands, except per share data) (unaudited) Three
months ended March 31, 2005 2004 Net revenue $10,782 $13,230 Cost
of revenue 7,148 7,825 Gross margin 3,634 5,405 Operating expenses:
Research and development 2,449 2,757 Sales and marketing 2,435
3,317 General and administrative 2,471 2,825 Amortization of
intangible assets 176 303 Restructuring and other charges 189 91
Total operating expenses 7,720 9,293 Loss from operations (4,086)
(3,888) Interest and other, net 1,159 399 Loss from continuing
operations before income taxes (2,927) (3,489) Benefit (provision)
for income taxes 87 (116) Loss from continuing operations (2,840)
(3,605) Loss from discontinued operations (136) (29) Gain on sale
of discontinued operations 55 97 Net loss $(2,921) $(3,537) Loss
per share from continuing operations: Basic and diluted $(0.18)
$(0.23) Income (loss) per share from discontinued operations: Basic
and diluted $(0.01) $0.00 Net loss per share: Basic and diluted
$(0.19) $(0.23) Shares used in computing loss per share: Basic and
diluted 15,485 15,326 SCM MICROSYSTEMS, INC. Condensed Consolidated
Balance Sheets (in thousands) (unaudited) March 31, December 31,
ASSETS 2005 2004 Current assets: Cash, cash equivalents and
short-term investments $44,028 $46,153 Accounts receivable, net
6,861 8,700 Inventories 6,469 8,319 Other current assets 2,492
2,336 Total current assets 59,850 65,508 Property, equipment and
other assets, net 5,657 6,059 Intangibles, net 1,480 1,740 Total
assets $ 66,987 $ 73,307 LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities: Accounts payable $4,044 $4,790 Accrued
expenses and other current liabilities 19,973 21,557 Total current
liabilities 24,017 26,347 Deferred tax liability 130 131
Stockholders' equity 42,840 46,829 Total liabilities and
stockholders' equity $ 66,987 $ 73,307 DATASOURCE: SCM
Microsystems, Inc. CONTACT: Steve Moore, Chief Financial Officer,
+1-510-360-2300, or , or Darby Dye, Investor Relations-US,
+1-510-360-2302, or , or Manfred Mueller, Investor
Relations-Europe, +49 89 9595 5140, or , all of SCM Microsystems,
Inc. Web site: http://www.scmmicro.com/
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