Smart cards might get lost in the vast computer enterprise that is Groupe Bull of France, but company officials say that may be to its great advantage.
The division that focuses on chip card systems, Bull Smart Cards and Terminals, brings in less than 5% of the corporate revenue. With the anticipated takeoff of smart cards as identification and security devices in information technology, the smart cards and terminals unit is gaining prominence inside and outside the company.
"We are the only smart card company inside an IT (information technology) company," said David Levy, president of the division. "The future of the card is IT, so if you're not an IT company you can only produce a commodity."
Bull is a pioneer of smart cards, dating from their invention and early patents, some of which Bull owns, in the 1970s. Mr. Levy, 39, personifies how the company is taking the chip card business more seriously than ever.
Hired away from rival Gemplus Group in March 1998, Mr. Levy has been intent on bringing a new focus to Bull and beefing up its marketing.
Most notable is Bull's relatively recent emphasis on GSM, the Global System for Mobile communications standard that rules the European cellular telephone market and is trickling into North America.
Since Mr. Levy's arrival, Bull has invested significantly in the GSM market, which it views as a more immediate and stable prospect than banking and financial services.
"GSM is really more a recurring business," Mr. Levy said. "This is why to avoid the bumps in the revenue we have to work in it."
Last February, Bull, which is based in Louveciennes, France, announced the first fruits of its labor: a GSM SIM card-SIM stands for subscriber identification module, which authenticates the phone's user-based on Sun Microsystems Inc.'s Java technology.
The card, SIM Rock n'Tree, was tested in a two-slot mobile telephone, which many in the industry say is the future of telephony, smart cards, and even banking.
The card breaks new ground with 32K of memory, which allows many applications to reside on the card, often downloaded via the Internet or other communications lines. "What was a commodity before (has evolved into) what is really part of an IT system," Mr. Levy said.
In a recent demonstration Bull loaded cash onto the card electronically through a mobile phone, using the Proton system.
Bull says it is proud that it develops only microprocessor cards, not the less complex memory cards that make up large parts of shipments by competitors Gemplus and Schlumberger, primarily for pay telephones.
"Because GSM is growing so fast, people are using public phones less and less," said Jerome Janin, vice president of marketing for Bull Smart Cards and Terminals. "Therefore, the memory card market will drop dramatically."
Bull, however, was not the only one, or the first, to notice opportunity in the GSM market.
Gemplus is already a major provider of SIM cards and has made GSM a priority for its software group. Schlumberger has come out with its own Java-based 32K card, Cyberflex SIMera 32. Orga and Giesecke & Devrient of Germany also have strong GSM businesses.
"Focusing on GSM is a necessity rather than a differentiator," said Duncan Brown, director of research for North America at Ovum Inc. in Burlington, Mass.
Bull's differentiator, according to Mr. Levy, is its background in security. He claimed that Bull's Java card is more secure than the others and said his department is working on a research document to prove it.
Like others, Bull stresses its ability to provide "complete smart card solutions." Its smart card group works closely with the Bullsoft software department and the systems integration division.
One of Bullsoft's products, OpenMaster, is used by Microsoft Corp. to manage its Hotmail system. Access management systems such as this are a perfect fit for smart cards, which increase security and ease user difficulties, for instance, by memorizing a slew of access passwords, Mr. Levy said.
Bull can also draw on its rich heritage. Michel Ugon, director of advanced research and security, developed the first chip card more than 20 years ago, and Bull holds more than 1,200 patents on the cards and associated equipment.
All microprocessor cards use the Bull CP8 technology for the microelectronic part of the chip, yielding a stream of licensing fees from competitors.
Since Mr. Levy joined, his unit's revenue has been fairly steady. It reported $259 million of revenue for 1997 and $245 million for 1998. Half of that comes from smart cards, 25% from payment terminals, and the rest from automated teller machine sales.
Bull sold its terminal business to Groupe Ingenico, a Paris card terminal maker, in January. As part of the agreement, Bull holds a 31% equity stake in Ingenico and works in a strategic partnership with it.
The revenue decline in 1998 was attributed to a major contract Bull won in 1997 to roll out an electronic purse system in Holland for all of the country's banks. Mr. Levy said all other sales grew in 1998.
Bull executives said 1999 year-to-date revenue is running about 35% ahead of 1998, but they would not disclose specific figures.
Bull is "very focused on (its) technology," said Mr. Brown of Ovum. "The harsh reality is that they have not been as aggressive in marketing that technology as, say, Gemplus or Schlumberger, and have therefore slipped behind."
Gemplus has shipped about 135 million microprocessor cards, and Bull has shipped about 75 million, according to Ovum.
Bull has been trying to rectify that, in part, by advertising in major business publications. Mr. Levy's background at the marketing-savvy Gemplus organization probably made him attactive to Bull.
Bull is in discussions with two U.S. credit card issuers-it said one is a bank and the other is a financial services company-to deploy one million to two million smart cards for each sometime in the first half of 2000. The cards would combine credit and debit functions with a stored-value electronic purse.
Bull's microprocessor-card specialty has helped make it the leader in the banking industry, to which it claims to have delivered more than 90% of all smart cards.
Bull has been successful in electronic purse applications, specifically with Proton, the most widely used electronic purse system. It has shipped more than 30 million chip cards to Proton affiliates around the world.
For all his expertise and prominence in the card-supplier community, Mr. Levy has not been in this business very long. Before joining Gemplus he was an adviser to the French Ministry of Defense for a little over a year. Before that he worked at Cogema, a nuclear power company in France, from 1990 to 1995. He was vice president in charge of economic studies and strategy and, later, vice president of the uranium branch.
He started his career, after graduating from the Ecole Polytechnique, in the French Ministry of Industry, where he worked from 1984 to 1990.
"Bull recruited him because he wasn't only a technology guy, he was a smart card marketing guy," Mr. Brown said. The chip card industry is "very competitive," and "you have to get the word out there." Gemplus and Schlumberger are making strong bids for the IT security market, for example.
Mr. Levy is well aware of the marketing challenge.
"It's always very difficult to sell security," he said. "This means we have to change an engineering company into a good marketing company."
But Mr. Levy sees this as a good problem to have and said Bull's strength in technology was one of the main reasons he moved there from Gemplus, where he was chief operating officer for a year and a half. Bull has been a steady force in the so-far modest U.S. market since 1984. After a prolonged wait, it expects its efforts and expertise in information technology to pay off.
Mr. Levy said he sees two types of smart card companies emerging: basic card producers, and developers for "the IT part of the card."
"I would rather be a developer of the IT part of the card" he said, "and this is why I entered Bull."