Spinoff's Smart Card Division Says It Is Quitting the Business

A former division of AT&T said it will drop out of the smart card race.

After a restructuring of the giant telecommunications company, the smart card division, which was spun off with Lucent Technologies, has been "discontinued as part of a plan to streamline operations," said Dave Bikle, a Lucent Technologies spokesman.

He said the decision was made because the market for its product - contactless smart cards - "has developed at a slower rate than expected."

Industry observers were not surprised by the news.

"It was a poorly designed product," said Jerome Svigals, a Redwood City, Calif.-based smart card consultant. He said contactless cards should be readable at four inches from the terminal, but the former AT&T unit's cards need to be much closer to complete a transaction.

He said Lucent Technologies' decision was logical. "With the breakup of AT&T and the need to retrench, it was an obvious place to cut."

However, Mr. Svigals said the market for contactless cards is growing rapidly, contrary to Lucent Technologies' position. He noted that Hong Kong's mass transit system, one of the largest in the world, is going contactless. Mikron, an Austrian chip maker recently purchased by Philips, will supply the contactless chips for that project, Mr. Svigals said.

Most of employees have already left the smart card unit or have been reassigned.

John Bermingham, the most recent president of AT&T Smart Cards, left the business last December. He took a position as president of Rolodex/Curtis of Secaucus, N.J., a division of Insilco Corp.

Frederick Honold, vice president of global markets for the smart card division, is now manager of AT&T Solutions.

Mr. Bikle said the company would fulfill existing orders for its smart cards, but would not accept any new orders. Current clients include Delta Airlines, which uses the cards for its ticketless travel program.

He said the company would either license or sell the technology, which has been in development for more than 10 years. Discussions with prospective buyers are in progress.

The company had announced in June 1995 that it was planning to license the technology to expedite adoption of contactless technology. At that time the company said it didn't want its technology to be eclipsed by contact chips, the type used in most financial services applications.

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