SCM Microsystems Reports Third Quarter Results

By product segment, third quarter 2004 revenues included $4.0 million from sales of digital TV security modules for pay-TV broadcast decryption, $4.6 million from sales of smart card readers and other products for PC and network security, and $2.4 million from sales of OEM digital flash media reader technology. Gross margin from continuing operations in the third quarter of 2004 was 29% and included the write-down of approximately $1.1 million in inventory for the Company’s flash media reader and digital TV products. Operating expenses for continuing operations in the third quarter of 2004, as reported in accordance with GAAP, were $7.7 million, down 14% sequentially from second quarter 2004 operating expenses of $8.9 million. The third quarter figure includes amortization of intangibles of $0.3 million and a net credit to restructuring and other charges of $0.1 million. Operating loss for the third quarter was $(4.6) million. This compares with operating loss of $(0.8) million in the year ago quarter, which included amortization of intangibles of $0.3 million and a net credit to restructuring and other charges of $0.6 million. Net loss from continuing operations for the third quarter of 2004, as reported in accordance with GAAP, was $(4.2) million, or $(0.27) per share, compared with net income of $1.1 million, or $0.07 per share in the third quarter of 2003. Guidance For the fourth quarter of 2004, 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 a lack of visibility into 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 fourth quarter of 2004.