Inside’s Sales Sank as Financial Crisis Took Hold in 2009

Jan 18 2011

As an indication of just how much the financial crisis in 2009 soured orders for contactless smart cards by U.S. banks, recently released financial figures from contactless and NFC vendor Inside Secure showed sales plunged by 28% that year.

Inside, formerly known as Inside Contactless, was heavily dependent on the U.S. contactless card market at the time and saw its sales fall from €35.8 million (US$50.5 million) in 2008 to €25.8 million in 2009, according to the recently released financial results.

Inside posted a net loss of just under €9.6 million in 2009, higher than the €7.6 million it lost in 2008, according to the recent filing. It lost €10.1 million in 2007. Like other privately held companies based in France, Inside is required to file its financial results with the commercial court registry, though the company was apparently late in doing so.

Inside, which has a dominant share of the market for chips for contactless credit and debit cards issued by U.S. banks, had earlier revealed that contactless chip orders fell from about 83 million units in 2008 to 60 million in 2009, as the financial crunch, which began in late 2008, began to bite.

The company recovered in 2010, with chip shipments rising to about 100 million, Charles Walton, Inside’s chief operating officer, earlier told NFC Times.

Sources told NFC Times they estimate that Inside had sales of around US$50 million in 2010, not counting the Atmel unit. That’s about the same level of sales the company recorded in 2008. Inside was also expected to lose money again in 2010. The company is not yet required to file its financial report for last year.

Update: Despite the plunging revenue, Inside points out it continued to set aside a high percentage of its budget for research and development. The company reported in the filing that it spent nearly €11 million on research and development in 2009, more than 25% of its expenses for the year. Inside's CEO Rémy de Tonnac said the R&D spending was actually about €17 million, taking into account all R&D-related costs.

"Yes, 2009 was real difficult; despite that, we have been keeping investing very heavily on NFC," he told NFC Times. "This is where we have been a pioneer, and where we established the standard. 2011 will be a payoff year, (and) we are glad we spent all the money in 2009." End update.

Inside announced last fall that it had finalized its acquisition of U.S.-based chip maker Atmel Corp’s smart card business unit, agreeing to pay $32 million, plus $21 million if Inside meets certain financial targets with the business.

In its recent financial report, Inside estimated the acquisition would triple its sales. It added about 170 Atmel employees, more than doubling headcount.

Inside raised an additional €50 million (US$65 million) from its venture capital investors to pay for the acquisition and continued operations, including research and development. Atmel itself chipped in €3 million for the funding round.

The Atmel acquisition enables Inside to diversify its product base to include contact and dual-interface smart card chips. Dual-interface chips, especially for EMV bank cards, are expected to grow at a healthy pace.

The NFC chip market is also starting to take off. Inside has already announced it supplies relatively small French handset maker Sagem Wireless with NFC chips. Sources said that among other handset makers buying Inside’s NFC chips is Research in Motion for some of its BlackBerry models.


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