Gemplus is one of those technology companies that defies pigeonholing.

The world leader in smart card manufacturing is also a card-equipment producer, a software and development house, a consulting and system integration firm, and a pretty fair marketing machine. Its leaders try to tie all that together as "solutions"-a piece of technobabble that fits their style. They want to fit in in places like Silicon Valley, where linguistic precision is not necessarily a cool commodity.

If they were truly interested in cutting through the communications clutter, they might admit that they are really in the missionary business.

Time spent with Gemplus people, especially at corporate headquarters in the south of France, reveals that smart cards and the officially stated goal of "making the world a smarter place" are almost a religious crusade.

Gemplus and a few major competitors are in a common struggle to profit from the modernization of payment systems. But Gemplus is different from, say, its France-rooted competitors Bull and Schlumberger, whose chip card businesses are small slices of big corporate pies.

Gemplus started 10 years ago with the single obsession of smart cards. The missionary zeal may be of necessity. The sense of urgency translates into a cult-like fervor, a shared belief that Gemplus has the people, the products, the "solutions" to change the world, even if only by sheer will and energy.

"We have to create this business," Sami Baghdadi, the company's segment manager for banking and retailing, said in a typical display of confidence.

Hope also springs eternal.

"The first move is going to be an important move," Dominique Trempont, head of Gemplus Americas in Redwood City, Calif., said of a U.S. banking market that is notoriously hesitant to commit to smart cards. "I think they (bankers) are beginning to get it."

"We are looking to the United States to put chips on credit and debit cards," said Frederic Spagnou, Mr. Trempont's counterpart for Europe, the Middle East, and Africa.

Mr. Spagnou's markets do not resist the way the United States does, but he is convinced all dominoes would fall if only the Americans would buy into the smart card logic. "Maybe there will come a time when fraud is so expensive that they will just have to," Mr. Spagnou said.

That may be hopeful, but Gemplus' numbers are hard.

Gemplus estimated 900 million smart cards were produced last year, up from 690 million in 1996. Its share of the worldwide market was 43%, up a point in 1997.

The company is projecting a 38% annual growth rate (last year's was 30%) through 2003, to 6.3 billion cards. Half of those would be for public telephones, another 11%, or 690 million, in banking.

Gemplus does the arithmetic another way: In 1989, a year into its existence, there was one smart card for every 100 people in the world. In 1996 the ratio was one for 10. In 2003 it would be one for one-"a major, major factor," said the Franco-Belgian-accented Californian, Mr. Trempont.

"In the beginning, everybody was laughing at us," said Philippe Mas, one of the company founders. "Now everybody is using our numbers."

These are people ready to give odds, with reasoning to back them up.

American bankers who have not been persuaded of the "business case" for smart cards probably have not heard Mr. Mas' brief on product quality.

Magnetic stripe cards-Gemplus produces them, too-have a failure rate of 250 parts (cards) per million. The comparable statistic for chips in cards, based on Gemplus' experience with its oldest customer, France Telecom, is 100 parts per million. The latter number has declined from 800 in 1989.

"Quality is a selling point against the magnetic stripe card," Mr. Mas said.

Gemplus published an annual report for 1997 so thorough that it belies the company's privately held status. Many another $600 million, 4,000- employee multinational would not be so forthcoming. Aside from the subtext that an initial public offering is in Gemplus' future-the executives are characteristically not shy to admit as much-the openness underscores that need to be noticed and heard. That missionary thing.

"Investment bankers are talking to them all the time," said William Melton, founder of Verifone Inc. and Cybercash Inc. and a Gemplus board member. "People don't realize how big Gemplus is. They produce a million cards a day."

Revenue climbed 50% last year, to the equivalent of $592 million. Of that, 63% came from Europe, the Middle East, and Africa. The Americas produced 20%-Gemplus is a supplier to many major smart card tests and trials and owns the old DataCard Corp. production business-and Asia-Pacific 17%. Just under half the worldwide sales were microprocessor cards, which in 1996 overtook the simpler memory cards as the top revenue source.

But 1997 profits were a mere $2 million, a 90% drop. Competitors and other observers of the company, who tend to admire Gemplus as a plucky entrepreneurial success story, smelled weakness.

"The results last year were not very good," said one. "They may have invested in capacity faster than the market is growing."

Another speculated that before any IPO, Gemplus would be seeking further capital infusions from "strategic partners." The list already includes GE Capital, the French electronics giant Dassault, NTT Data Corp. of Japan, and the Quandt family of Germany, which has assembled a multinational portfolio of card technology investments.

Gemplus says it has simply been investing in its future. Research and development spending almost doubled last year, to $42 million.

"We have the industry's largest smart card development team," consisting of 385 engineers, Mr. Mas boasted. Along with other parts of Gemplus, R&D has been decentralized in several locations around the globe.

Daniel Le Gal, who became president and chief executive officer late last year, said a corporate-wide restructuring had left Gemplus "in an ideal position to capitalize on the tremendous opportunities in the smart card industry."

"With its regionalized strategy, Gemplus is better aligned to meet customer needs and is leveraging local talent to provide the most relevant solutions," Mr. Le Gal wrote in the annual report. Gemplus is "moving from its core business of smart card development and manufacturing to building software packages and enhancing services around its products."

The futuristic, R&D emphasis is grounded in culture and tradition. Mr. Le Gal and his flamboyant predecessor, Marc Lassus, who remains a bit more distantly involved as chairman of Gemplus Associates International, were part of a founding group that came out of the microelectronics company SGS- Thomson.

It was never seen as enough for Gemplus to be just a card maker, though Mr. Mas, another of the "founding five," conceded that "we are a manufacturing company, even if our software component increases over time." Gemplus' thousands of square meters of factory and card-personalization space and 24-hour production lines attest to that.

"The major contribution of Gemplus to this industry was to take it from the craft level to the industrial level with mass-manufacturing techniques," Mr. Mas said.

To sustain the commitment and stay No. 1 amid all that could go wrong in high technology, Gemplus must push ever harder to stay ahead of the game, both by improving processes and beating competitors to the new-product punch.

Currently on view at the typical trade show are products such as GemXpresso, Gemplus' entry in the Java development race; PocketBase, which brings data base technology down to the card for marketing and analysis purposes; and GemSafe, a data security and authentication tool that reflects the company's conviction that smart cards are ideal for ensuring safe electronic commerce.

One can only guess what will come next out of the research labs, but Mr. Mas said, "Sometimes we have crazy ideas."

Because "the card is not always the best format," he said, Gemplus is exploring how to use contactless technology-chips that can be read some distance from a terminal device, as in highway toll collections and mass transit systems-as inventory tags or alternatives to merchandise bar codes.

With advances in integrated circuitry, Mr. Mas said, bendable chips are on the horizon. They would no longer be restricted to today's hard plastic casing. "We could have chips as large as a card, which means megabytes of memory," he said.

Typical of where Gemplus would like to go and how it wants to get there is SkiData, an Austrian company it acquired last year. SkiData pioneered development of contactless payment and ticketing systems for ski areas and other resorts. One of its products is KeyWatch, a Swatch with a contactless chip inside that can be waved in front of, say, a ski-lift gate.

SkiData is one of many applications on display at one of the world's most comprehensive chip card demonstration sites, which Gemplus runs adjacent to a factory in La Ciotat. The town made the French map because it is where the Lumiere Brothers invented cinema in 1895, and Gemplus sponsored a commemorative exhibit there in the centennial year.

Rather than dismantle it, Gemplus left the sound-studio environment in place and turned it into "Cinecicarte," a "smart cards in the world" exhibition. Visitors are given chip cards and invited to try them at a mock ski lift and in parking meters, a movie ticket booth and a postage meter, in telephones and for pay television, for reading gas meters and recording one's own blood pressure (which can obviate the need for multiple doctor visits). All of it works, but it's a bit of a chore to travel there, which puts an onus on the marketing and sales force to keep customers coming to the Provence region.

There seem few inhibitions in this missionary culture. One of the top executives used the word "maverick" in describing it, saying it results from Mr. Lassus' iconoclasm, the high-tech focus, and the remoteness from the stuffier business climate of Paris.

That may help explain an irony not lost on Mr. Melton, who said, "Cybercash is a small company that isn't making money but is public. Gemplus will do $800 million (in revenue) as a private company."

Mr. Lassus made waves in June when, in a Wall Street Journal article, he criticized the French bureaucracy and anti-business attitudes for preventing companies like his from becoming globally competitive.

Gemplus embraces Silicon Valley and all it represents. "The model we have to copy is American, not French," Mr. Lassus asserted.

He hired Mr. Trempont from Next Software Inc., which was started by Steve Jobs of Apple Computer fame, and based him right in the middle of that community. Mr. Trempont's deputies-such as sales chief Michael Crosno and vice president of strategic marketing Donna Jeker-are steeped in American, if not entirely Silicon Valley, technology experiences.

Mr. Spagnou, who is based at headquarters in Gemenos, is an Apple veteran. Mr. Baghdadi came from Nokia, the mobile phone leader.

"We had to get closer to the Java community, which is California," said senior vice president and Gemplus co-founder Gilles Lisimaque, referring to the Sun Microsystems Inc. computer language that seems ideally suited for linking cards along with other devices over the Internet.

But Gemplus has also spoken its corporate mind about a less utopian aspect it encountered.

"As a global merchant and supplier of technology, Gemplus certainly wants to see electronic commerce succeed," John Landwehr, director of information technology product marketing, said at a House Commerce Committee hearing in July. "For this to happen, the United States must first learn that not all of the great products in the world are made in the U.S.A., and we need to facilitate better technology transfer and global product development strategies."

"Twelve years ago, Next had the best technology-so what?" Mr. Trempont said. "It failed to 'cross the chasm'," he said, invoking the book title of Silicon Valley marketing guru Geoffrey Moore, which describes the struggle to bring leading-edge innovations into the mainstream.

"I have lived that model completely," and Gemplus is now "pushing in that direction," Mr. Trempont said. "This is a business that does not operate well with exclusives-it's totally open."

Mr. Trempont caused a stir of his own this year after telling American Banker that banking was not always in the forefront of his smart card thinking.

Elaborating more recently, he said, "We are trying to approach the financial industry with other applications attached.

"This is one industry, and what is at stake is not the debit and credit platform. It is about revenue-generating projects."

Because the intelligence in smart cards allows them to be individualized and customized, Mr. Trempont suggested that mass-marketing and -production thinking are no longer appropriate.

"A lot of people in this industry think in volumes, and I am not sure it will work that way," he said. "Manufacturing may still be according to a personal computer model, but not the overall dynamics of this business."

Gemplus people participate in lively debates about where and how smart cards might break through, whether into the consumer mass-market or banking specifically. Some say it will filter out from pay telephones and GSM, the wireless phones for which Gemplus is a leading producer of subscriber chip cards. Others say satellite and cable television will put cards into people's possession faster, and banks would be able to piggyback on that. Or the same might happen with merchant loyalty programs.

Focusing on banking, Mr. Baghdadi said PC-based programs secured with smart-card authentication could be the key to electronic commerce and related growth.

"Banking has been a very demanding market," Mr. Baghdadi said. Its competing operating systems and standards, such as Visa's Java-based approach and Mondex's Multos system, have confused matters.

Mr. Baghdadi said he hopes those competitors work with vendors to "try to figure out where we can go together." He would like to see a convergence of technologies. Progress in that direction is uncertain, but "at least people are talking."

"We as a company cannot go everywhere," Mr. Baghdadi said. "We will have to take some risks and find our own way."

Mr. Trempont said Gemplus wants to help devise the chasm-crossing formulas that people are groping for. "For smart cards to succeed, they will have to be simple and compelling."

He holds open the possibility that somebody big-he mentioned Citicorp, Chase Manhattan Corp., and Microsoft Corp. as hypotheticals-will be the first to act on the notion of smart cards as a "strategic platform," and thereby open the floodgates.

"If the Internet did not come along, the U.S. may have been able to go on indefinitely without smart cards," he said.

"We now see some very interesting companies behind the scenes getting ready to go for mind share. I don't know who will move first, but it will be on a very large scale. Once one makes that move, all will."

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