Gemalto Reports Third Quarter 2006 Revenue [1]

Amsterdam (Netherlands) October 26 (PROTEXT/PRNewswire) - Third QuarterRevenue at EUR 390 Million, Down 8% at Constant Exchange Rates, as MarketEnvironment Remains Difficult in Mobile Communication

- Year-to-date Pro Forma Revenue at EUR 1,237 Million, 1% Lower Than LastYear at Constant Exchange Rates, and Stable at Current Exchange Rates

- Deployments of Electronic Passports Projects Lead to 20% Growth in ID

& Security in the Third Quarter 2006 at Constant Exchange Rates

- Strong Improvement in Net Cash, up EUR 42 Million, to EUR385 Million

- Integration Program and Synergy Generation Well On-Track

Gemalto (Euronext NL0000400653 - GTO), a leader in digital security, todayannounced its revenue for the quarter ended September 30, 2006.

In millions of EUR Q3/2006 Year-on-year change at historical exchange rates Year-on-year change at constant exchange rates YTD 06 Pro forma Year-on-year change at historical exchange rates Year-on-year change at constant exchange ratesMobile 230.4 -14% -12% 721.2 -8% -9%Communication Secure 93.0 -5% -4% 284.3 +8% +8%Transactions ID & Security

42.2 +19% +20% 148.8 +56% +55%Public 13.6 -24% -21% 46.5 -11% -12%Telephony Point of 11.3 -31% -29% 36.1 -21% -21%Sales Terminals Total revenue 390.5 -10% -8% 1,236.9 0% -1%

Olivier Piou, Chief Executive Officer, commented: "Market demand for

Gemalto products and services remained strong in our major businesssegments. However, price pressure particularly in Mobile Communicationeliminated revenue growth for the quarter and year to date. We continue tosee significant strength in our ID & Security segment, which turned inanother strong quarter and secured several new e-passport projects.

Our merger integration program is moving ahead, on target and on schedule.The integration process has validated the net synergies we anticipated atthe outset, and revealed additional opportunities that we are implementing.The markets we serve are dynamic and we are fully committed to making theadjustments needed to ensure that we remain in line with our long-termobjectives."

Third quarter 2006 and year-to-date pro forma revenue impacted by adifficult market environment in Mobile Communication

Microprocessor card deliveries[2] grew 31% to 281 million units in thethird quarter 2006, sustained by strong demand in all core businesssegments. Year-to-date, deliveries were up 34% to 826 million units.

Third quarter total revenue was down 8%, at constant exchange rates,reflecting varying performance between business segments. Strong growth inIdentity & Security was offset by lower revenue in Mobile Communication, aremnant of strong average selling price decrease in the first quarter.

On a pro forma basis, year-to-date revenue was stable. After adjusting forthe Setec acquisition, revenue was down 3% year-to-date at constantexchange rates.

Third quarter 2006 segment analysis

Mobile Communication performance reflects the strong ASP decline incurred

earlier in the year and a shift in geographical mix

In millions of EUR 2005 Pro forma 2006 Pro forma Year-on-year change at historical exchange rates Year-on-year-change at constant exchange ratesThird quarter revenue 267.8 230.4 -14% -12%Year-to-date revenue 784.7 721.2 -8% -9%

Strong unit volume growth in SIM cards did not offset the effect of thedecrease in the average selling price:

- Deliveries for the third quarter 2006 were up 34% year-on-year to 219million units, driven by strong demand in Asia and in EMEA[3], notably inEastern Europe, the Middle East and Africa. Lower sales in the Americasreflect a slowdown in new subscriber additions as well as price competition.

- Average selling price for the third quarter 2006 was down 32% year onyear, at constant exchange rates, mainly due to the strong competitiveprice pressure during the first quarter and a shift in the geographic mix.Compared with the second quarter 2006, average selling price was down 3.9%,at constant exchange rates.

In the quarter, Gemalto's digital security leadership and high end

application expertise were rewarded:

- The Group was selected to supply high-end products, consulting servicesand project management for two nationwide mobile TV rollouts.

- The Company Over-The-Air personal information and phonebooksynchronization applications continued to receive strong interest fromnetwork operators and are generating new value-added services revenue inthe Americas.

Secure Transactions posted a slight decline due to slower EMV[4] revenue

in Europe

In millions of EUR 2005 Pro forma 2006 Pro forma Year-on-year change at historical exchange rates Year-on-year change at constant exchange ratesThird quarter revenue 97.9 93.0 -5% -4%Year-to-date revenue 262.3 284.3 +8% +8%

Microprocessor card deliveries for the third quarter 2006 were up 11% to 52million units, driven by on-going EMV deployment, particularly in Turkey,Latin America and North Asia. Volumes were slightly down in EMEA reflectingcompletion of the initial EMV migration in the United Kingdom and delays inEMV rollouts in Southern Europe. Revenue was also impacted by pricepressure in mature markets.

Contactless payment activity has now moved beyond the United States toAsia, where Gemalto achieved strong recognition and growth. The Group isalso supplying technology for several pilot projects in Asia and in Europe.

Excellent performance in ID & Security

In millions of EUR 2005 Pro forma 2006 Pro forma Year-on-year change at historical exchange rates Year-on-year change at constant exchange ratesThird quarter revenue 35.6 42.2 +19% +20%Year-to-date-revenue 95.2 148.8 +56% +55%

Revenue growth was driven by deliveries of e-passports solutions,

including initial deployments of large scale programs in France and Poland.

Gemalto received initial orders in the third quarter for e-passportssolutions from the USA, Poland and Slovenia, adding several meaningful andhighly visible contracts to those awarded earlier this year in France, theCzech Republic, Portugal and Russia.

Gemalto technology was also selected in the second phase of the Sultanateof Oman e-government program. Gemalto will provide an update of theRegistration System, integration services, and 2.5 million high-end smartID cards to offer additional e-government services to the population of theSultanate.

Point-of-Sale Terminals

Slower activity in this segment reflects delays earlier this year in tenderawards in Asia a transition to a new range of products scheduled forintroduction later in the fourth quarter 2006.

Regional analysis

Third quarter revenue by region

In millions of EUR Q3 2005 Q3 2006 % change at historical exchange rates % change at constant exchange ratesEMEA 227.4 215.6 -5% -4%North and South America 128.3 92.3 -28% -26%Asia 79.7 82.6 +4% +8%Total revenue 435.4 390.5 -10% -8%

Regional analysis shows a substantial shift in revenue contribution byregion: Asia accounted for 21% of third quarter 2006 revenue compared with18% a year ago. Revenue growth in this area was driven by SecureTransactions and Mobile Communication. In EMEA, remarkable growth in ID &Security was offset by lower revenue in Mobile Communication and SecureTransactions. The Americas sharply lower contribution to total revenuereflects the much lower market demand for Mobile Communication products,while Secure Transactions recorded strong growth over last year in LatinAmerica, building solid positions around the EMV deployments.

Outlook

The third quarter market environment proved challenging, and the Companyexpects an improvement in the fourth quarter. With synergies from thecombination materializing progressively, in line with plans, and thesignificant resources required this year to converge product roadmaps andprocesses, Gemalto continues to expect operating margin in the second half2006 to be similar to that of the first half.

The Group is confident in its ability to play a leading role in the globaldevelopment of digital security. It has taken cost reduction measuresbeyond the initially identified synergies, and continues to adapt to matchthe changing needs of the marketplace. Management is determined to ensurethat Gemalto meets its long term objective of an operating margin in thelow teens in 2009.

Conference call

The company has scheduled a conference call for Thursday, October 26,

2006 at 2:30 pm CET (1:30 pm BST and 8:30 am New-York time). Callers may

participate in the live conference call by dialling: +44(0)207-365-1836 or+1-718-354-1158 or +33-1-70-99-42-72. The slide show will be available onthe web site at 12:00 CET (11:00 BST).

Replays of the conference call will be available approximately 3 hoursafter the conclusion of the conference call until November 2, 2006 midnightby dialling: +44(0)207-806-1970 or +1-718-354-11-12 or +33-1-71-23-02-48,access code: 2104153.

Earnings calendar

Full year 2006 revenue is scheduled to be reported on February 1, 2007,before the opening of Euronext Paris. The schedule for the announcement offiscal year 2006 results will be communicated on February 1, 2007.

Corporate Media Relations

Emmanuelle SABY

M.: +33(0)6-09-10-76-10

E-mail: emmanuelle.saby@gemalto.com

Investors Relations FINEO

Stephane BISSEUIL

T.: +33(0)1-55-01-50-97

E-mail: stephane.bisseuil@gemalto.com

Remi CALVET

M.: +33(0)6-22-72-81-58

E-mail: remi.calvet@gemalto.com

FINEO

T.: +33(0)1-56-33-32-31

About Gemalto

Gemalto (Euronext NL 0000400653 GTO) is a leader in digital security withpro forma 2005 annual revenues of $2.2 billion (EUR 1.7 billion),operations in 120 countries and 11,000 employees including 1,500 R&Dengineers. The company's solutions make personal digital interactionssecure and easy in a world where everything of value - from money toidentities - is represented as information communicated over networks.

Gemalto thrives on creating and deploying secure platforms, portable andsecure forms of software in highly personal objects like smart cards, SIMs,e-passports, readers and tokens. More than a billion people worldwide usethe company's products and services for telecommunications, banking,e-government, identity management, multimedia digital right management, ITsecurity and other applications. Gemalto was formed in June 2006 by thecombination of Axalto and Gemplus.

For more information please visit: http://www.gemalto.com

APPENDIX

Revenue breakdown by business segment

In millions of EUR Q3/2005 Pro forma As a % of total Q3/2006 As a % of total YTD 05 Pro forma As a % of total YTD 06 Pro forma As a % of totalMobile 267.8 62% 230.4 59% 784.7 63% 721.2 58%Communication Secure 97.9 22% 93.0 24% 262.3 21% 284.3 23%transactions ID and Security 35.6 8% 42.2 11% 95.2 8% 148.8 12%Public Telephony 17.8 4% 13.6 3% 52.1 4% 46.5 4%Point of Sales 16.3 4% 11.3 3% 45.8 4% 36.1 3%Terminals Total revenue 435.4 100.0% 390.5 100.0% 1,240.1 100.0% 1,236.9 100.0%

First quarter revenue by business segment

In millions of EUR Q1/2005 Pro forma Q1/2006 Pro forma % change at historical exchange rates % change at constant exchange ratesMobile 236.7 229.9 -3% -8%Communication Secure transactions 71.9 91.4 +27% +25%ID and Security 22.6 53.2 +135% +127%Public Telephony 17.8 17.9 +1% -4%Point of Sales 15.7 13.8 -12% -14%Terminals Total revenue 364.7 406.2 +11% +7%

Second quarter revenue by business segment

In millions of EUR Q2/2005 Q2/2006 % change at historical exchange rates % change at constant exchange ratesMobile 280.3 260.8 -7% -8%Communication Secure transactions 92.5 99.9 +8% +7%ID and Security 36.9 53.4 +45% +44%Public Telephony 16.5 15.0 -9% -11%Point of Sales 13.9 11.0 -20% -21%Terminals Total revenue 440.0 440.1 0% -1%

Year-to-date revenue by region

In millions of EUR YTD 2005 Pro forma YTD 2006 Pro forma % change at historical exchange rates % change at constant exchange ratesEMEA 651.7 665.0 +2% +2%North and South America 340.1 304.3 -11% -13%Asia 248.2 267.6 +8% +6%Total revenue 1,240.1 1,236.9 0% -1%

In the first half 2006 earnings release, the Company presented additionalfinancial information on an adjusted pro forma basis which was prepared inUS dollars. The adjusted pro forma information of the corresponding periodshave been prepared assuming that the combination with Gemplus had takenplace as of January 1, 2005, and excluding charges arising from theaccounting treatment of the transaction and one-off expenses incurred inconnection with the combination with Gemplus. This adjusted pro formainformation is presented below in euros for the six month periods endedJune 30, 2005, June 30, 2006 and December 31, 2005.

For a more detailed description of the basis of preparation of thisadjusted pro forma information, please refer to EXPLANATION OF ADJUSTED ANDPRO FORMA MEASURES at the end of the first half 2006 earnings press release.

Gemalto adjusted* pro forma income statement(assuming the combination wasexecuted on January 1, 2005)

All amounts in euro thousands (except where otherwise stated)

Six months ended

30-Jun-05 31-Dec-05 30-Jun-06Sales 804,750 919,659 846,312Cost of sales (541,434) (623,593) (590,343)Gross profit 263,316 296,066 255,969Gross margin 32.7% 32.2% 30.2%Operating expenses: Research and engineering (55,763) (60,760) (59,388)Sales and Marketing (97,767) (109,545) (108,469)General and administrative (52,273) (62,108) (57,183)Other income, net 2,214 1,397 (128)Operating income 59,728 65,051 30,801Operating margin 7.4% 7.1% 3.6%Financial income (expenses), net 2,069 2,535 5,720Share of profit (losses) of associates (990) 1,426 271Profit before income tax 60,806 69,012 36,792Income tax expense (10,928) 14,024 (2,408)Profit for the period 49,879 83,035 34,385Attributable: Equity holders of the company 31,586 46,935 16,399Minority interest 18,292 36,100 17,986Basic earnings per share (in EUR) 0.51 0.75 0.26In thousands: Basic average number of shares outstanding 62,425 62,316 62,399

* excluding one-off expenses incurred in connection with the combinationwith Gemplus and charges resulting from the accounting treatment of thetransaction

DISCLAIMER

The Gemalto N.V. securities referred to herein issued in connection withthe exchange offer of Gemalto N.V. for the securities of GemplusInternational S.A., and the Gemalto N.V. shares issued in connection withthe reopening of such exchange offer, have not been (and are not intendedto be) registered under the United States Securities Act of 1933, asamended, (the "Securities Act") and may not be offered or sold, directly orindirectly, into the United States except pursuant to an applicableexemption. The Gemalto securities have been and will be made availablewithin the United States in connection with the exchange offer pursuant toan exemption from the registration requirements of the Securities Act.

The exchange offer and its reopening relate to the securities of a non-UScompany and are subject to disclosure requirements of a foreign countrythat are different from those of the United States. Financial statementspresented have been prepared in accordance with foreign accountingstandards that may not be comparable to the financial statements of UnitedStates companies.

It may be difficult for an investor to enforce its rights and any claim itmay have arising under U.S. federal securities laws, since Gemalto N.V. andGemplus International S.A. have their corporate headquarters outside of theUnited States, and some or all of their officers and directors may beresidents of foreign countries. An investor may not be able to sue aforeign company or its officers or directors in a foreign court forviolations of the U.S. securities laws. It may be difficult to compel aforeign company and its affiliates to subject themselves to a U.S. court'sjudgment.

This release does not constitute an offer to purchase or exchange or thesolicitation of an offer to sell or exchange any securities of Gemalto N.V.or an offer to sell or exchange or the solicitation of an offer to buy orexchange any securities of Gemplus International S.A.

Gemplus security holders are strongly advised to read the offering circularrelating to the exchange offer and related exchange offer materialsregarding the transaction (see below), as well as any amendments andsupplements to those documents because they contain important information.

The exchange offer and its reopening described herein are not (and are noteintended to be) made, directly or indirectly, in or into the UnitedKingdom, Italy, the Netherlands, Canada or Japan or in or into any otherjurisdiction in which such offer would be unlawful prior to theregistration or qualification under the laws of such jurisdiction.Accordingly, persons who come into possession of this release should informthemselves of and observe these restrictions.

Copies of the free English translation of the joint French languageoffering document which has received visa No. 06-252 of July 6, 2006 fromthe French Autorite des marches financiers and of the documentsincorporated by reference thereto are available from the Internet websitesof Gemalto N.V. (http://www.gemalto.com) and of Gemplus InternationalS.A.(http://www.gemplus.com) as well as free of charge upon request to thefollowing: Gemalto N.V.: Koningsgracht Gebouw 1, Joop Geesinkweg 541-542,1096 AX Amsterdam, the Netherlands; Gemplus International S.A.: 46A, avenueJ.F. Kennedy, L-1855 Luxembourg, Grand Duchy of Luxembourg; Mellon InvestorServices LLC, U.S. Exchange Agent: 480 Washington Boulevard, Attn:Information Agent Group,AIM # 074-2800, Jersey City, New Jersey 07310, CallToll Free: 1-866-768-4951.

[1] Third quarter 2005, year-to-date 2005 and year-to-date 2006 revenueprovided in this press release are on a pro forma basis, reflecting thecombined activity of Gemalto and Gemplus over the corresponding period,assuming that the combination had taken place as of January 1, 2005.

[2] Deliveries reported in the first half 2006 earnings release includedsome contactless memory cards in Secure Transactions and ID & Security:actual microprocessor card deliveries in the first half 2006 was 545million units of which 97 million units in Secure Transactions

[3] Europe, Middle East, Africa

[4] EMV is a jointly defined set of specifications dedicated to paymentsafety improvement, adopted by Europay, MasterCard and Visa for themigration of bank cards to microprocessor card technology.

Source: Gemalto

Corporate Media Relations, Emmanuelle Saby, M.: +33(0)6-09-10-76-10,e-mail: emmanuelle.saby@gemalto.com; Corporate Communication, Remi Calvet,M.: +33(0)6-22-72-81-58, e-mail: remi.calvet@gemalto.com; InvestorsRelations , Stephane Bisseuil , T.: +33(0)1-55-01-50-97, e-mail:stephane.bisseuil@gemalto.com; FINEO, T.: +33(0)1-56-33-32-31

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