SCM Microsystems Reports Third Quarter Results FREMONT, Calif.,
Nov. 4 /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, 2004. Revenues from continuing
operations in the third quarter of 2004 were $11.0 million, within
previously communicated guidance of $8 million to $12 million and
representing a decrease of 31% from revenues of $15.9 million in
the third quarter of 2003. By product segment, third quarter 2004
revenues included $4.0 million from sales of digital TV security
modules for pay-TV broadcast decryption, $4.6 million from sales of
smart card readers and other products for PC and network security,
and $2.4 million from sales of OEM digital flash media reader
technology. Gross margin from continuing operations in the third
quarter of 2004 was 29% and included the write-down of
approximately $1.1 million in inventory for the Company's flash
media reader and digital TV products. Operating expenses for
continuing operations in the third quarter of 2004, as reported in
accordance with GAAP, were $7.7 million, down 14% sequentially from
second quarter 2004 operating expenses of $8.9 million. The third
quarter figure includes amortization of intangibles of $0.3 million
and a net credit to restructuring and other charges of $0.1
million. Operating loss for the third quarter was $(4.6) million.
This compares with operating loss of $(0.8) million in the year ago
quarter, which included amortization of intangibles of $0.3 million
and a net credit to restructuring and other charges of $0.6
million. Net loss from continuing operations for the third quarter
of 2004, as reported in accordance with GAAP, was $(4.2) million,
or $(0.27) per share, compared with net income of $1.1 million, or
$0.07 per share in the third quarter of 2003. Robert Schneider,
chief executive officer of SCM Microsystems commented, "We made
good progress in the third quarter against our goal of reducing
operating expenses by 25% by early next year. Overall sales levels
were at the high end of our expectations, and underlying gross
margin remained stable. We will continue to focus on improving our
operational and revenue performance in what remains a difficult
market scenario." Guidance For the fourth quarter of 2004,
management estimates that revenues will be in the range of $8
million to $11 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. 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
fourth quarter of 2004. Conference Call SCM will hold a conference
call and webcast on November 4, 2004 at 8:30 a.m. Eastern Time to
discuss the results of its 2004 third quarter. The webcast can be
accessed through the Company's investor relations site at
http://www.scmmicro.com/ir_en/index.html. NOTE: SCM's reported
financial performance for the third quarter of 2004 reflects
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 securely access digital content and services.
The company develops, markets and sells its smart card reader
technology for 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 (i) our expectations
for revenue, gross margin and operating loss for the fourth
quarter; and (ii) our ability to lower expenses and improve
operational and revenue performance. Actual results could differ
materially. Our financial results may not meet expectations. Our
efforts to reduce expenses may be unsuccessful, or may take longer
than expected. 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, 2003 and
our Quarterly Report on Form 10-Q for the quarter ended June 30,
2004, 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, 2004 2003 2004 2003 Revenues $10,957
$15,860 $35,698 $53,913 Cost of revenues 7,825 9,243 25,443 32,363
Gross margin 3,132 6,617 10,255 21,550 Operating expenses: Research
and development 2,486 1,949 8,039 6,879 Sales and marketing 2,744
2,748 9,116 8,571 General and administrative 2,303 3,082 8,077
8,975 Amortization of intangible assets 278 287 872 841
Restructuring and other charges (credits) (82) (647) (140) 1,779
Total operating expenses 7,729 7,419 25,964 27,045 Loss from
operations (4,597) (802) (15,709) (5,495) Gain (loss) from
investments -- 365 -- (95) Interest and other, net 359 75 1,132 520
Loss from continuing operations before income taxes (4,238) (362)
(14,577) (5,070) Benefit (provision) for income taxes 59 1,456 (67)
1,235 Net income (loss) from continuing operations (4,179) 1,094
(14,644) (3,835) Loss from discontinued operations (96) (4,074)
(203) (13,214) Gain (loss) on sale of discontinued operations 186
(5,911) 248 (11,800) Net loss $(4,089) $(8,891) $(14,599) $(28,849)
Net income (loss) per share from continuing operations: Basic and
diluted $(0.27) $0.07 $(0.95) $(0.25) Net income (loss) per share
from discontinued operations: Basic and diluted $0.01 $(0.66)
$(0.00) $(1.63) Loss per share: Basic and diluted $(0.26) $(0.59)
$(0.95) $(1.88) Shares used in computing income (loss) per share:
Basic 15,426 15,169 15,382 15,334 Diluted 15,460 15,476 15,595
15,334 SCM MICROSYSTEMS, INC. Condensed Consolidated Balance Sheets
(in thousands) (unaudited) September 30, December 31, ASSETS 2004
2003 Current assets: Cash, cash equivalents and short-term
investments $46,827 $55,038 Accounts receivable, net 6,666 10,378
Inventories 9,629 9,108 Other current assets 2,879 8,909 Total
current assets 66,001 83,433 Property, equipment and other assets,
net 6,699 9,933 Intangibles, net 2,163 3,076 Total assets $74,863
$96,442 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable $3,710 $7,571 Accrued expenses and other current
liabilities 22,241 25,447 Total current liabilities 25,951 33,018
Stockholders' equity 48,912 63,424 Total liabilities and
stockholders' equity $74,863 $96,442 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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