Two German smart card manufacturers that have set their sights on the United States are finding the market big enough for two different strategic approaches.
Gieseke & Devrient America Inc., subsidiary of a German currency printer, has become a major supplier of Visa Cash cards, firmly entrenching itself in the world of banking applications.
Orga Card Systems Inc., whose German parent is owned by three corporations in that country, is going after the telecommunications industry here.
In August, Orga secured a million-card minimum commitment from Omnipoint Corp. for the new digital mobile phone technology known as personal communication services. The deal, covering the New York area, could mean as many as three million cards over three years.
Smart cards, with embedded computer chips, contain customer account information and would be used to activate the mobile phone. Orga inked a deal last fall with American Personal Communications, another provider of personal communications services, to supply smart cards for its Sprint Spectrum service in the Washington area.
"We're big in telecommunications," said Holger Mackenthun, president of the U.S. Orga operation in Paoli, Pa. "That's where most of the (smart card) applications are."
Benjamin Miller, chairman of CardTech/SecurTech, the Rockville, Md.- based conference organizer, called Orga a "major worldwide player" in global standard for mobile telecommunications, or GSM, the international version of the digital mobile phone network.
Gieseke & Devrient, with a 150-year history of currency printing,"is tied culturally to the financial industry," said Joseph Schuler, senior vice president of Schlumberger, a leading French smart card company with operations here. Schlumberger and its home-country competitors, Gemplus and Bull Group, supply the lion's share of smart cards in the United States and around the world.
Still, Mr. Schuler said the expansion of the U.S. market will create opportunities for all the manufacturers.
In Supplying 800,000 cards to NationsBank for the Olympics Visa Cash pilot in Atlanta, Gieseke & Devrient established a firm alliance with Visa. It is vying to participate in the New York smart card test scheduled to begin early next year with Visa, MasterCard, Citicorp, and Chase Manhattan Corp.
The German company also supplied card-dispensing machines to Wachovia Corp. for the Atlanta pilot and 5,000 Visa Cash cards for BankAmerica Corp.'s limited-edition Olympic series.
R. Kirk Brafford, program manager, Gieseke & Devrient in Reston, Va., said since his hiring in 1994, he has laid groundwork, established relationships, and generally spread the word about the company.
"Things started to kick in last fall with Visa Cash," he said. While profits have not yet materialized for U.S. operations, its German parent, Gieseke & Devrient GmbH posted $240 million in card revenues for 1995. Orga's German parent, Orga Kartensysteme GmbH, garnered $85 million in card revenues for 1995.
Mr. Brafford said Gieseke & Devrient has been a global standard for mobile telecommunications pioneer in Germany and elsewhere. It competes for personal communication services applications as well as prepaid phone cards and other telecommunications applications, but it has been held back by a fastidious "quality orientation," said Mr. Miller.
Over-the-air initialization for digital mobile communications had not been standardized, so Gieseke & Devrient didn't offer the feature that other companies, like Orga, promoted through proprietary means.
Mr. Brafford said a standard was recently put in place, and the company will offer the feature soon. He also said the organization is working with several satellite communications companies to supply smart cards for their activation systems.
Orga - owned by Preussag, a giant German steel maker; Bundesdruckerei, a federal printing company comparable to the U.S. Mint; and Detecon, a consultancy owned by Deutsche Telekom, Deutsche Bank, and Dresdner Bank - was formed 11 years ago as a smart card producer for global standard for mobile telecommunications and prepaid phone applications. It has been less aggressive in the financial services industry.
Several industry sources said Preussag is dissatisfied with the company and wants to divest. Mr. Mackenthun said the steel maker may indeed sell its shares to the other two owners, to better concentrate on its core business.
Orga also suffered a setback in its attempt to secure a card manufacturing base in the United States. It announced a joint venture last year with Kirk Plastic Co., which could have given Orga a U.S. presence similar to those of Gemplus or Schlumberger. That deal fell through, and last month Kirk Plastic, the second-largest bank card producer in the United States, was sold to Francois-Charles Oberthur, a French currency printer that co-owns a smart card operation with Bull Group.
Kirk Hyde, president of Los Angeles-based Kirk Plastic, said Orga was stumbling in the banking arena, but other observers said financial differences split the companies.
Though Orga supplied 20,000 reloadable, stored-value cards for MasterCard's Australian smart card pilot, the company is not bidding on the New York test. Mr. Mackenthun said that was because it cannot produce cards and personalize them here.
Still, Mr. Mackenthun is optimistic that Orga will either purchase another plastics maker or set up personalizing facilities of its own in the near future.
Gieseke & Devrient acquired Security Card Systems of Toronto earlier this year and has a plant in Mexico City. It expects to purchase a U.S. facility as well. Through its Toronto facility, it will manufacture cards for Mondex's Canadian issuers.
