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More
than 1 billion euros was wiped off Gemalto's market value after
the company said the slow take-up of cards embedded with
so-called EMV chips to prevent counterfeit card fraud had caused
an inventory build-up.
Payments network operators such as Visa and Mastercard have been
pushing for the adoption of cards embedded with EMV, which
stands for EuroPay, MasterCard and Visa, chips.
However, this drive has met with resistance from the banking
industry due to the need for investment.
Gemalto expects annual profit from operations to be similar to
2016 levels, when it made an annual profit of 453 million euros
($489 million), down around 10 percent from its previous
estimate. The company cut its annual profit forecast for 2017 to
the 500-520 million euro range in October.
"This update primarily reflects a double-digit decline in our
assumption for the payment cards total available market in the
United States," Gemalto said in a statement.
Gemalto had until recently said it was not affected in the same
way as its peers by the U.S. chip card inventory build-up,
though that situation now appears to have reversed, Morgan
Stanley's Andrew Humphrey said in a note to analysts.
The sector-wide impact of EMV weakness due to excess inventory
levels was flagged by Gemalto's U.S. rival CPI Card earlier this
month.
Gemalto also expects first-quarter revenue to fall 7 percent to
9 percent from a year earlier, at constant exchange rates.
Humphrey said this could mean a halving of the U.S. business in
the short term.
Annual revenue at its payments business would be about 100
million euros lower than initially expected, Gemalto said,
adding that it was reviewing its action plan and would provide
further details in a trading update at the end of April.
(Reporting by Wout Vergauwen in Gdynia; editing by David Clarke
and Alexander Smith)
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