SCM Microsystems Reports First Quarter Results

SCM Microsystems, has reported first quarter ended March 31, 2004. SCMs reported financial performance for the 2004 first quarter reflects continuing operations for the Companys Security business only, as SCM sold its retail Dazzle-branded digital media and video business in July of 2003. SCMs continuing Security business is focused on enabling secure access to digital content and services through the digital television and PC platforms. Financial results for the retail digital media and video business are being treated as discontinued operations. First Quarter Results Revenues from continuing operations in the first quarter of 2004 were $13.2 million, within the range of management guidance of $12 million to $15 million. This represents a decrease of 29% compared with revenues of $18.7 million in the first quarter of 2003, and a sequential increase of 5% from revenues of $12.6 in the fourth quarter of 2003. By product segment, first quarter 2004 revenues included $5.9 million from sales of Digital TV security modules, $4.3 million from sales of smart card readers and other products for PC and network security, and $3.0 million from sales of OEM flash media reader technology. Gross margin from continuing operations in the first quarter of 2004 was 41%, within the range of management guidance of 40% to 42%. Operating expenses for continuing operations in the first quarter of 2004, as reported in accordance with GAAP, were $9.3 million. This figure includes amortization of intangibles of $0.3 million and $0.1 million in other charges for legal settlement and costs related to the Companys Security business. Operating loss for the quarter was $(3.9) million. This compares with operating loss of $(0.5) million in the year ago quarter, which included amortization of intangibles of $0.3 million and restructuring and other charges of $0.3 million. Net loss from continuing operations for SCMs Security business for the first quarter of 2004, as reported in accordance with GAAP, was $(3.6) million, or $(0.23) per share, compared with net income of $0.1 million, or $0.01 per share, in the first quarter of 2003. Balance Sheet Cash, cash equivalents and short-term investments at the end of the first quarter of 2004 grew to $56.2 million, compared with $55.0 million at December 31, 2003. Guidance For the second quarter of 2004, management estimates that revenues from its Security business will be in the range of $13 million to $15 million, reflecting continued pressure on sales of Digital TV products in Europe and a lack of visibility into the timing of anticipated digital security projects in the U.S. and Europe. Gross margin is expected to be between 40% and 42%. Within this range of revenue and gross margin, SCM expects to record an operating loss for its Security business in the second quarter of 2004.