Gemplus SA, the No. 1 smart card manufacturer, is setting up a new company to develop software it says could take card chip technology mainstream.

ThinkPulse Inc. will be announced today as the future home of Gemplus' smartX software, introduced last year to standardize smart card readers and allow them to work with a variety of application platforms and operating systems - some already in use and others to be developed.

ThinkPulse will be headquartered in San Jose, Calif., taking with it 16 Gemplus employees and all of smartX's intellectual property. Gemplus, of Gemenos, France, said it will own 80% of ThinkPulse initially but become a minority owner when a second round of financing is completed.

Gemplus, whose U.S. base is in Redwood City, Calif., said the start-up's staff should grow to 45 in its first year and that it is slated to go public in two years or so.

U.S. executives of Gemplus said ThinkPulse has already been endorsed by industry giants including Microsoft Corp. and Sun Microsystems Inc., which see smartX as a way to broaden the market for their own products by making chip technology easier to deploy.

ThinkPulse will continue to develop smartX, which is meant to allow all manner of smart card terminals - including those embedded in wireless handsets, television set-top boxes, and personal computers - to work with any card without hardware updates. Gemplus describes smartX as an attempt to supply a "unifying application framework for smart card development across multiple platforms and operating systems."

"This will ease the entry barrier for banks and others to start offering smart cards," said Michel Roux, chief executive officer of ThinkPulse and a former Gemplus vice president. "We will make the card issuer's life much easier, because their investment will be more protected and they'll have the ability to bridge from the cards of today to the cards of the next generation." Today, terminal manufacturers need to know an exact application or operating system in order to develop the corresponding reader. Mr. Roux said smartX would allow financial institutions to issue a low-grade proprietary card to its regular customers and a high-level, multiapplication Java card to its premier customers.

Separating from Gemplus improves smartX's chances of becoming an industry standard and moving to market faster, because it opens the doors for Gemplus' competitors to adopt the technology, Mr. Roux said.

"We want to be as open as possible to maximize our chances to make this a standard," Mr. Roux said. "That's the motivation of having an arms-length relationship with Gemplus."

Mr. Roux said widespread adoption of smartX would expand the smart card market 5% to 10%. "When you're the market leader with more than 40%, that's a great benefit," he said.

Mike Dusche, product manager for smart cards at Microsoft, said, "By providing a new level of abstraction to cards and terminals, smartX dramatically leverages our own efforts to open the potential of smart card applications to a new population of developers."

Alyxia T. Do, an analyst at Frost & Sullivan, said ThinkPulse will fill a void in smart card development.

"It's Gemplus' answer to Windows and Java," Ms. Do said. Windows and Java "are very active on the card side, but they haven't moved so aggressively to terminal development and IT development for terminals, so Gemplus probably thought, 'We'll go to the terminal side and reposition ourselves that way.' It's pretty smart - instead of battling it out on the cards, you're doing it on the hardware side of it."

That Gemplus is willing to cede control of ThinkPulse to other investors "speaks a lot about the power that they're willing to give up to see this product succeed," Ms. Do said.

Anneace Haddad, president and chief executive officer of Welcome Real-time, a smart card loyalty software developer in France, said he had developed a proprietary program for his readers but now may switch to smartX.

Mr. Haddad said ThinkPulse is "a very good move" because it "will really help [smartX] become a lot more of a standard."

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