SCM Microsystems Reports Gourth Quarter and Fiscal 2004 Results

For the full fiscal year ended December 31, 2004, the Company expects to report revenues from continuing operations of $49.1 million, compared with revenues of $66.5 million for the fiscal year ended December 31, 2003. The Company further expects to report gross margin from continuing operations in the fourth quarter of 2004 of 35%, which includes the write-down of approximately $1.4 million in inventory, primarily for the Companys digital TV and smart card reader products. As reported under U.S. GAAP, operating expenses for continuing operations in the fourth quarter of 2004 are expected to be in a range of $7.2 million to $7.7 million, including amortization of intangible assets and restructuring and other charges between $0.1 million and $0.5 million. Loss from operations for the fourth quarter of 2004 is expected to be between $(2.6) million and $(3.0) million, including the range of amortization of intangible assets and restructuring and other charges noted above. This compares with loss from operations for the fourth quarter of 2003 of $(6.0) million as reported under U.S. GAAP, including amortization of intangible assets and restructuring and other charges of $3.2 million. Additional Sales Information By product segment, expected fourth quarter 2004 revenues include $6.8 million from sales of smart card readers and other products for PC and network security, $4.7 million from sales of digital TV security modules for pay-TV broadcast decryption and $1.9 million from sales of OEM digital flash media reader technology. Strong seasonal sales of smart card readers for U.S. government security projects contributed to higher than usual revenues from this product category in the fourth quarter. Selected Key Balance Sheet Items at December 31, 2004 Expected key balance sheet items at December 31, 2004 include: - Cash, cash equivalents and short-term investments of $46.2 million, compared with $46.8 million held at the end of the previous quarter; - Accounts receivable of $8.7 million; and - Inventories of $8.3 million. Guidance For the first quarter of 2005, management estimates that revenues will be in the range of $8 million to $11 million, reflecting continued pressure on sales of digital TV products in Europe and variability in the timing of anticipated digital security projects. Gross margin is expected to be between 38% and 41%. Within this range of revenue and gross margin, SCM expects to record an operating loss in the first quarter of 2005.