FREMONT, Calif., Nov. 9 /PRNewswire-FirstCall/ -- SCM Microsystems,
Inc. (Nasdaq: SCMM; Prime Standard: SMY), a leading provider of
solutions that open the Digital World, today announced results for
its third quarter ended September 30, 2005. Revenues in the third
quarter of 2005 were $13.3 million, in line with management's
revised guidance of $13 million to $14 million, published October
12, 2005, compared with revenues of $11.0 million in the third
quarter of 2004. Third quarter 2005 revenues benefited from
unexpectedly strong seasonal demand from a small number of
customers that the company does not expect to continue in the
fourth quarter. By product segment, third quarter 2005 revenues
included $5.3 million from sales of digital TV security modules,
$3.9 million from sales of smart card readers and other products
for PC and network security, and $4.1 million from sales of OEM
digital media reader technology. Gross margin in the third quarter
of 2005 was 39%, within the range of management guidance of 38% to
41%. Gross margin in the third quarter benefited from a net release
of reserves for inventory previously written down of approximately
$0.9 million, offset by $0.2 million in severance costs related to
the outsourcing of manufacturing operations at the company's
Singapore facility. Operating expenses, as reported in accordance
with GAAP, were $7.3 million in the third quarter of 2005,
including net charges for amortization of intangibles,
restructuring and other items of $0.2 million. This compares with
operating expenses of $7.7 million in the third quarter of 2004,
which included $0.2 million of net charges for amortization,
restructuring and other items. Operating loss for the quarter, as
reported in accordance with GAAP, was $(2.1) million, compared with
operating loss of $(4.6) million in the year ago quarter. Loss from
continuing operations for the third quarter of 2005, as reported in
accordance with GAAP, was $(1.8) million, or $(0.11) per share,
compared with loss from continuing operations of $(4.2) million, or
$(0.27) per share, in the third quarter of 2004. Robert Schneider,
chief executive officer of SCM Microsystems, commented, "In
addition to the beneficial impact of the unexpected seasonal demand
that we experienced in the third quarter, there were positive
developments across our business lines. Q3 marked our second
quarter of recognizing revenue from sales of our digital TV modules
in South Korea under contracts that include commitments through
2007. Demand for our smart card readers continues to be steady in
Europe and promising across all regions, driven by current and
anticipated smart card programs in the enterprise, healthcare,
financial and government sectors. We successfully introduced new
digital media reader products both for photo kiosk and consumer
electronics applications, confirming our position as a leader in
the OEM digital photo reader market. On the operational side, we
completed the outsourcing of our manufacturing operations in a move
intended to streamline product production and supply and reduce
costs." For the fourth quarter of 2005, management currently
estimates that revenues will be in the range of $10 million to $13
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 for the fourth quarter of 2005 is currently expected to be
between 38% and 41% of total revenues. Within this range of
revenues and gross margin, SCM expects to record an operating loss
in the fourth quarter of 2005. SCM does not plan to hold a
conference call or webcast to discuss the results of its 2005 third
quarter. For more information on SCM's third quarter results,
please see the Company's Quarterly Report on Form 10-Q for quarter
ended September 30, 2005, filed with the U.S. Securities and
Exchange Commission on November 9, 2005. 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 include, without
limitation, our statements regarding our expectations for revenues,
gross margin and operating performance in the fourth quarter of
2005. These statements are subject to risks and uncertainties,
which may cause actual results to differ materially from those
contemplated herein. Our financial results may not meet
expectations. Some of the 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 September
30, 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 Nine months
ended September 30, September 30, 2005 2004 2005 2004 Revenues
$13,312 $10,957 $34,335 $35,698 Cost of revenues 8,117 7,825 22,249
25,443 Gross margin 5,195 3,132 12,086 10,255 Operating expenses:
Research and development 2,196 2,486 6,921 8,039 Sales and
marketing 2,237 2,744 7,301 9,116 General and administrative 2,696
2,303 7,455 8,077 Amortization of intangible assets 163 278 513 872
Restructuring and other charges (credits) 25 (82) 188 (140) Total
operating expenses 7,317 7,729 22,378 25,964 Loss from operations
(2,122) (4,597) (10,292) (15,709) Interest and other, net 467 359
2,143 1,132 Loss from continuing operations before income taxes
(1,655) (4,238) (8,149) (14,577) Benefit (provision) for income
taxes (137) 59 40 (67) Loss from continuing operations (1,792)
(4,179) (8,109) (14,644) Loss from discontinued operations (166)
(96) (435) (203) Gain (loss) on sale of discontinued operations
(89) 186 (74) 248 Net loss $(2,047) $(4,089) $(8,618) $(14,599)
Loss per share from continuing operations: Basic and diluted
$(0.11) $(0.27) $(0.52) $(0.95) Income (loss) per share from
discontinued operations: Basic and diluted $(0.02) $0.01 $(0.04)
$0.00 Loss per share: Basic and diluted $(0.13) $(0.26) $(0.56)
$(0.95) Shares used in computing loss per share: Basic and diluted
15,542 15,426 15,517 15,382 SCM MICROSYSTEMS, INC. Condensed
Consolidated Balance Sheets (in thousands) (unaudited) September
30, December 31, ASSETS 2005 2004 Current assets: Cash, cash
equivalents and short-term investments $35,808 $46,153 Accounts
receivable, net 7,057 8,700 Inventories 5,319 8,319 Other current
assets 2,725 2,336 Total current assets 50,909 65,508 Property,
equipment and other assets, net 4,943 6,059 Intangibles, net 1,053
1,740 Total assets $56,905 $73,307 LIABILITIES AND STOCKHOLDERS'
EQUITY Current liabilities: Accounts payable $4,700 $4,790 Accrued
expenses and other current liabilities 15,533 21,557 Total current
liabilities 20,233 26,347 Deferred tax liability 111 131
Stockholders' equity 36,561 46,829 Total liabilities and
stockholders' equity $56,905 $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
Web site: http://www.scmmicro.com/
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