Gemalto announces layoff plan

In relation with its series of profit warnings, Gemalto just announced a reorganization of its activities in France that will lead to 288 job losses. The company will downsize its activities on three of its French sites: Gemenos and La Ciotat in Provence, and Meudon near Paris. These layoffs, essentially targeting marketing, communication, and sales functions, represent around 10% of the company headcount in France. On a global basis, around 600 job positions may be made redundant, out of a 15,000 total headcount.

According to Gemalto, this is a result of a slowdown in demand for SIM and banking cards as well as price pressure in both segments. The company even recognizes its historical removable SIM business is declining at double-digit rates. At the same time, the US EMV market, once booming is slowly normalizing and inventories have been accumulated long the distribution channels.

The company, after its fourth profit warning in a year, now anticipates its full year profit from operations (PFO) to be between EUR 293 million and EUR 323 million, a 28% to 35% fall compared to 2016. Originally, the company expected its 2017 PFO to be around 600 million, whereas 2016 PFO reached EUR 453 million. Earlier this year, Gemalto announced a transition plan that included EUR 50 million in cost reduction. Gemalto share has lost 42.26% (at time of writing) since January 1st, 2017.

At the same time, Fredric Vasnier, EVP Gemalto, declares that cybersecurity, IoT and government segments are undergoing a two-digit growth. Anticipating the evolution from the SIM card to the eSIM (embedded SIM) and, more globally the ongoing dematerialization of security solutions, Gemalto management has been undertaking an ambitious series of acquisitions: the company has completed in 2017 the acquisition of the Identity Management business (Cogent) of 3M, after SafeNet in 2015, and numerous smaller companies.

The other historical leaders in the secure transactions industry, Idemia (the combination of Oberthur and Morpho) and G+D (Giesecke & Devrient) are bound to face the same issues as Gemalto as their results heavily depend from the SIM and banking cards markets. The industry is evolving from a hardware-centric activity to a new positioning with a strong part of software and services. Only the most agile will survive!

Disclaimer: I own some Gemalto shares