CardLess Credit

Securing online payments and making consumers more comfortable while making online purchases is the vision of two forward-looking companies. SecuGen Corporation, global leader in the development of biometric fingerprint recognition systems, and TouchCredit Financial Services, Inc., provider of state-of-the-art online biometric payment solutions, today announced the formation of a strategic partnership to launch the world’s first-ever Cardless Credit(TM) payment system. Under this agreement, SecuGen’s core fingerprint recognition technology will be integrated into TouchCredit’s proprietary biometric payment system allowing consumers to purchase online products and services securely without the vulnerability of credit cards.

“SecuGen and TouchCredit share a vision of delivering enhanced security solutions to online consumers,” said Tom Pak, Vice President of Sales at SecuGen. “SecuGen is impressed with TouchCredit’s revolutionary line of Biometric Credit(TM) payment solutions, and we’re pleased to count them among our distinctive partnerships. As we work together to integrate our products and services, we are excited to create real world solutions for the online credit and debit market that has recently taken too many hits from fraud and loss,” said Tom Pak.

Together, SecuGen and TouchCredit will give a boost to online consumer spending and confidence by making it more convenient and secure to shop on the web with the new cardless line of credit protected by biometric technology. SecuGen’s fingerprint recognition system, which includes a biometric keyboard and biometric mouse, will be incorporated into TouchCredit’s advanced online payment system to authenticate users, providing an economical way to secure e-commerce transactions for consumers, e-tailers and financial institutions worldwide. Cardless Credit customers will have the unique ability to make purchases across all payment vehicles, including personal computers, mobile devices and personal digital assistants (PDAs) with just the simple touch of a finger.

Fighting Fraud In Cyberspace

The companies’ joint solutions will provide users with the most advanced security features and benefits available today. The payment industry is in need of a new mode of authentication where consumers can shop safely on the Internet. According to Meridien Research (Newton, Mass), online credit card fraud ran to $9 billion last year alone and is growing. The biometric payment system will utilize a real-time automated measurement of unique physiological and/or behavioral characteristics, providing the quickest, most convenient and secure platform to process financial transactions and biometric credit lines across a digital environment. There are no credit card numbers to worry about or credit cards to carry. By using biometrics to confirm the identity of a consumer before a purchase is made, TouchCredit will offer a compelling new way to simplify the online shopping experience for everyone; reducing fraud costs for e-tailers, operating expenses for issuing banks, and interest rates for consumers. “With security issues being a premium concern for online consumers, this joint partnership will provide customers with powerful solutions to the real problems and issues plaguing the virtual world,” said James Uberti, TouchCredit CEO and President. “Future customers will not only benefit from having the most secure online payment system available today, but they will also benefit from the extended features, functionality and cardless freedom that our offering provides, such as having the ability to shop online with just the simple touch of a finger. It is clear that SecuGen’s technology offers the most robust and reliable, yet cost-effective solutions for the global market,” said James Uberti.

About SecuGen Corporation

A pioneer of the biometric industry, SecuGen Corporation develops and markets award-winning optical fingerprint recognition technology worldwide. SecuGen’s products have been integrated into a broad range of applications in Internet, network and desktop security, physical access control and other electronic products. As a trusted source for reliable hardware and software products, including the EyeD family of PC Peripherals and SecuIBAS(TM) for Internet authentication, SecuGen is committed to ongoing research and development in biometrics technology. SecuGen is headquartered in Milpitas, California with manufacturing, sales and development affiliates in Canada, Hong Kong, Japan and Korea.

About TouchCredit Financial Services, Inc.

TouchCredit, the leading provider of Next Generation “Cardless” financial services, is a revolutionary biometric-based financial service company providing credit lines and credit services via a patent pending server-based Biometric Credit authentication payment system. While the Company’s pending patents cover the use of all biometric devices, TouchCredit has selected keystroke dynamics, finger imaging and voice recognition as the initial deployment of systems worldwide. TouchCredit is putting people in touch with their financial security and convenience by utilizing the latest in biometric one-touch credit technology, bringing back an old element of face-to-face human commerce. For more information, the Company can be contacted at [][1] or at +1-310-754-6264.



eONE Global, LP announced the appointment of Dennis Raney to the post of chief financial officer. With more than 30 years experience, Raney has worked for several high growth technology companies and brings broad financial and international management expertise along with an in-depth knowledge of business-to-business e-commerce. As CFO of eONE Global, Raney will oversee the company’s capital management and financial strategy, business planning and analysis, and finance and accounting. “With exemplary operating experience, leadership and industry knowledge, Dennis will play a key role in eONE Global’s growth and continued business expansion,” said Garen Staglin, president and chief executive officer of eONE Global. “He will be a valuable partner to the management teams at eONE Global and at our operating companies, SurePay and govONE Solutions. Based on the qualities necessary to lead eONE Global’s financial strategy and operations, Raney was the ideal fit,” added Staglin. Raney’s career includes executive level positions with major global technology businesses such as Novell, Hewlett Packard and Bristol-Myers Squibb, all of which have equipped him with an in-depth understanding of information technology and how it drives business success. He has been responsible for financial and administrative operations in Europe, Latin America, Africa, Asia, Australia and Japan. “eONE Global presents an opportunity for me to work with an exceptional team of visionaries focused on delivering innovative payment solutions to enterprises, governments and individuals. Based on the company’s outstanding partners — including First Data Corp. and iFormation Group — as well as its knowledge and progress in developing emerging technologies for the Internet and other applications, eONE Global is very well positioned to lead a marketplace that is quickly evolving,” said Raney.

eONE Global is owned by global payment services leader First Data Corp. (NYSE: FDC) and iFormation Group, a company founded by The Boston Consulting Group, General Atlantic Partners and The Goldman Sachs Group, to build new technology-enabled businesses in partnership with the Global 2000. Raney succeeds interim chief financial officer David Treinen, who has assisted eONE Global through operational growth, including investments and strategic alliances since the company’s launch in October 2000. Treinen will continue in his position as managing director at eONE Global with a focus on mergers and acquisitions. Most recently, Raney served as executive vice president and chief financial officer at Novell. He was a leading architect of the firm’s acquisitions, including the latest integration of Cambridge Technology Partners. While responsible for finance, information systems, operations, real estate and investor relations worldwide, Raney was part of a team that shifted Novell’s strategy toward Internet opportunities, focused on assisting enterprises and governments as they transition traditional processes onto the Internet. Earlier in his career, Raney spent 24 years at Hewlett Packard where he first established an interest in financial opportunities within the technology sector. He built a financial management career, while integrating significant international experience, including a four-year assignment managing Hewlett Packard’s financial and administrative operations in Asia, Latin America, Africa and Canada, followed by seven years in Geneva, Switzerland, as head of finance and administration for the company’s European operations. Raney serves on the board of Redleaf, an Internet operating company focused on developing seed stage businesses in business-to-business e-commerce. He also has served on the boards of ADAC Laboratories, a healthcare solutions company, and WR Hambrecht & Company, an Internet focused investment banking firm. Raney holds a master’s of business administration from the University of Chicago, and a bachelor’s of science degree in chemical engineering from the South Dakota School of Mines and Technology.

About eONE Global

As the leading source for accelerating payment innovation, eONE Global, LP ([][1]) identifies, develops, and operates emerging payment systems and related Internet and wireless technologies spanning the business, government and consumer markets. Its operating companies include SurePay, LP ([][2]), which provides end-to-end payment and security products for companies buying and selling over the Internet, as well as govONE Solutions, LP ([][3]), which enables businesses and consumers to make government payments electronically. eONE Global is owned by global e-commerce and payment services leader First Data Corp. and iFormation Group, a company founded by The Boston Consulting Group, General Atlantic Partners, LLC and The Goldman Sachs Group, to build technology-enabled businesses in partnership with the Global 2000.


Infineon 2Q/01

Infineon Technologies AG , one of the world’s leading semiconductor manufacturers, announced results for its third quarter ended June 30, 2001, with revenues of Euro 1.28 billion, a decrease of 30 percent year-on-year and of 23 percent from the previous quarter of this fiscal year. Revenues declined in the Wireline and Wireless Communications, Security & Chip Card ICs and Memory Products businesses compared to the previous quarter. Weaker demand, lower product prices and order cancellations affected each of these segments, while Infineon’s Automotive and Industrial electronics business remained strong.

EBIT (earnings before interest and tax) decreased to a loss of Euro 598 million, down from a positive EBIT of Euro 366 million in the same quarter last year and down from a positive EBIT of Euro 10 million in the second quarter of this year. Infineon’s loss was caused by strong price erosion, especially for memory products, and costs of carrying currently unused capacity in most segments. The loss also reflects charges of Euro 209 million in connection with inventory write-downs in all segments other than Automotive & Industrial, Euro 30 million of acquisition related expenses, and Euro 21 million related to investments in a research and development venture. Without these charges and expenses, EBIT amounted to a loss of Euro 338 million.

Net income in the third quarter decreased to a loss of Euro 371 million, down Euro 637 million from the same quarter of the last fiscal year and down Euro 394 million from the previous quarter of this year. Loss per share for the third quarter was Euro 0.59 as compared with earnings per share of Euro 0.43 in the third quarter of the last fiscal year and earnings per share of Euro 0.04 in the second quarter of this year.

“Infineon has managed to grow faster than the market in the first half of the fiscal year with a 37 percent revenues growth in our non-memory businesses based on our strong position in system solutions despite an increasingly difficult market environment. However, market conditions significantly deteriorated in the third quarter and finally had a negative impact on Infineon’s overall business”, commented Dr. Ulrich Schumacher, President and CEO of Infineon Technologies AG. “Our balanced product portfolio did not help to ease the current weakness in the memory market any longer. This dynamic development and the magnitude of the current downturn, especially in communications, was not expected.”

Excluding the effect of the inventory write-downs Infineon achieved a gross margin of 16 percent. Including this effect Infineon reached a negative gross margin of 1 percent, down from 28 percent in the second quarter of this year and 41 percent in the third quarter of fiscal year 2000. SG&A expenses reached 17 percent of total revenues, up from 9 percent in the third quarter of fiscal year 2000 and up from 13 percent in the previous quarter of this year but were kept flat in absolute terms at Euro 212 million in the previous quarter and in the third quarter of fiscal year 2001. Higher SG&A expenses as a percentage of total revenues primarily reflects the reduced revenues in the quarter.

R&D expenditures in the third quarter totaled Euro 318 million. R&D expenditures were 25 percent of total revenues, an increase from 16 percent in the previous quarter and from 13 percent year-on-year due in part to the significant decline in revenues. In absolute terms, R&D expenditures were up 34 percent year-on-year and up 18 percent from the previous quarter of this year reflecting the continued investment in future technologies such as 3G mobile communications and 10- to 40-Gigabit optical networking.

Revenues outside Europe constituted 46 percent of total revenues, reflecting a slight decrease from 48 percent in the previous quarter. As of June 30, 2001, Infineon had more than 34,600 employees worldwide, with research and development staff accounting for more than 5,400 of this total.

First Nine Months Results

Revenues for the first nine months of fiscal year 2001 amounted to Euro 4.59 billion, down 6 percent from Euro 4.90 billion in the same period last year. EBIT for the first nine months of this year decreased to a loss of Euro 142 million, down from positive earnings of Euro 863 million for the same period last year. Net loss was Euro 68 million, down from a net income of Euro 545 million for the same period last year.

Business Group Performance

The Wireline Communications group’s revenues reached Euro 188 million in the third quarter of fiscal year 2001, up 7 percent from the same quarter last year but down 17 percent from the previous quarter of this year. Sequential revenue decline was mainly due to weaker demand in the Wide Area Networks and fiber optics business segments. The group’s EBIT decreased to a loss of Euro 26 million, down Euro 51 million from last year’s third quarter and down Euro 63 million from the previous quarter of this year. The EBIT decline was due mainly to reduced revenues and to inventory write-downs in the amount of Euro 16 million. The EBIT also includes a charge of Euro 13 million for in-process research and development associated with the completed acquisition of Ardent Technologies, Inc. and other acquisition related expenses of Euro 12 million.

Major developments in the Wireline Communications group in the third quarter included

— successful build-up of the long-range Ethernet market based on 10BaseS in Asia/Pacific and Japan with increasing design-win activities at major customers (e.g. PCCW, Singtel and NTT)

— introduction of the first OC-768 Silicon Germanium-based MUX/DEMUX chipset to take the lead in the 40Gbit/s SONET/SDH market

— continued demand for analog line cards for traditional telecom infrastructure development in emerging markets.

The Wireless Communications group’s third quarter revenues were Euro 176 million, down 41 percent compared with the third quarter of the last fiscal year and down 36 percent from the previous quarter of this year. The decrease in revenues was mainly due to the further deterioration of the mobile handset market with order cancellations and delays from major customers and rising inventories at customers. EBIT in the third quarter dropped to a loss of Euro 176 million, down Euro 240 million year-on-year and down Euro 180 million from the previous quarter, due to inventory write-downs of Euro 84 million, lower sales volumes and costs of carrying currently unused capacity.

Major developments in the Wireless Communications group in the third quarter included

— expanded leadership in short-range wireless applications with the introduction of four new BlueMoon(TM) Bluetooth solutions, including first samples of the world’s smallest single-chip Bluetooth solution, as well as the certification of Infineon’s BlueMoon I solution according to the new Bluetooth 1.1 specification

— reorganization of the Infineon Wireless Group, including the optimization of R&D activities to further improve focus on important target markets as well as new business segments.

In the Security & Chip Card ICs group, which is reported in Other Operating Segments, quarterly revenues reached Euro 144 million, an increase of 67 percent over the third quarter of the last fiscal year, but a decline of 24 percent over the previous quarter of this fiscal year. Revenues were affected by the continued downturn in the mobile phone market leading to significant order cancellations for security controllers used in SIM-cards. EBIT declined to a loss of Euro 35 million, down Euro 47 million from the third quarter of fiscal year 2000 and Euro 71 million from the previous quarter of this year. The loss reflects strong pricing pressure, decreased sales volume and the write-down of Euro 28 million in inventory.

Major developments for the Security & Chip Card ICs group in the third quarter included

— strengthened market position in Asia after leading credit card supplier’s decision to use Infineon crypto-controllers for banking applications

— establishment of the Ingentix joint venture with Saifun Semiconductors Ltd. to jointly develop and manufacture flash memory products based on Saifun’s patented NROM (Nitrided Read Only Memory) and Infineon’s leading know-how for smart card applications; Ingentix is initially focusing on MultiMediaCard(TM) storage products.

The Automotive & Industrial group’s quarterly revenues rose to Euro 288 million, up 24 percent from the third quarter of last year and slightly outperforming the record level of the previous quarter. Revenue growth was driven by the continued demand for Infineon’s automotive and industrial power solutions as well as power management and supply solutions despite a slightly weaker market environment. In particular, Infineon’s automotive business benefited from the strong market performance of leading German car manufacturers, especially in Europe and the United States. EBIT amounted to Euro 38 million, up Euro 20 million from the third quarter of last year and down Euro 2 million from the second quarter of this year.

Major developments in the Automotive & Industrial electronics segment in the third quarter included

— a major design win at Delphi Automotive Systems with Infineon’s AUDO engine management micro-controller

— receipt of the “Innovation of the Year Award 2001” from EDN magazine for Infineon’s AUDO 32-bit TriCore(TM) solution in the micro-controller category.

Revenues for the Memory Products group amounted to Euro 332 million, a decrease of 62 percent from the third quarter of last year and a decrease of 36 percent from the previous quarter of this year due to the continued weakening of the market for memory products and a further 30 percent drop in average selling prices. EBIT decreased to a loss of Euro 340 million, down Euro 625 million from the third quarter of fiscal year 2000 and down Euro 206 million from the previous quarter of this year. EBIT decline reflects the further sharp erosion in sales prices for DRAMs and inventory write-downs in the amount of Euro 81 million.

Major developments in the Memory Products segment for the third quarter included

— the validation by Intel of Infineon’s 288Mb RDRAM in 0.17 micron technology, currently the smallest 288 RDRAM on the world market

— successful pilot production of memory products in the next generation 0.14 micron technology, this next generation technology has also successfully been implemented on 300mm wafers

— based on design wins at strategic customers, development of new specialty memory products such as RLDRAM, Mobile-RAM and SGRAM for high-performance applications.

In the Other Operating Segments, which includes the Security & Chip Card ICs group, the Opto Joint Venture with Osram and other smaller business groups, quarterly revenues amounted to Euro 277 million, an increase of 20 percent from the third quarter of last year but a decrease of 20 percent compared with the previous quarter. EBIT amounted to a loss of Euro 68 million, down Euro 89 million from the third quarter of last year and down Euro 114 million from the previous quarter.

Strategic Highlights

Infineon maintained world market leadership for chip card ICs for the third consecutive year, with a 34 percent market share in calendar year 2000 according to data recently published by Gartner Dataquest. The company also dominated the market for secure memories for chip card applications with a 60 percent market share in units. According to Dataquest, Infineon also improved to fourth rank in the DRAM market with a 9,4 percent world wide market share in calendar year 2000.

With the acquisition of Catamaran Communications Inc., Infineon will further strengthen its leadership in fiber optical communications. Infineon will issue US$ 250 million in ordinary shares to the Catamaran shareholders in connection with the acquisition. Catamaran is an emerging leader in integrated circuits for the next generation 40 Gbps and fast growing 10 Gbps segments of the optical networking market. Combining Infineon’s communications expertise with that of Catamaran will give the company an important competitive advantage in the fast growing optical networking market as well as a leading position in the high speed line card segment at speeds of 40 Gbps and beyond.

In addition, Infineon will further streamline its wireline communications portfolio with the sale of its infrared components business to Vishay Intertechnology Inc. in a two stage transaction for approximately US$ 120 million. With this divestiture Infineon will have implemented the restructuring of its Wireline Communications business. Infineon intends to continue to expand its strategic core wireline communications activities in the field of local area networks (LAN), wide area networks (WAN) as well as in access solutions.

The acquisition of Catamaran and the sale of Infineon’s infrared components business are both subject to regulatory approvals and closing conditions and are expected to be finalized in the fourth quarter of fiscal year 2001.

Outlook for 2001

During the third quarter market conditions in the semiconductor industry further deteriorated. Most leading market analysts currently predict a negative growth rate of 20 to 30 percent for calendar year 2001. Visibility for the market development in the second half of calendar year 2001 remains low and there are no clear signs of a market recovery in the coming months. Due to the current negative market conditions Infineon expects to incur a net loss in the fourth quarter as well as a loss for its fiscal year 2001.

Market conditions for memory products remain difficult. Weak demand, especially in the PC market, has led to significantly higher inventory levels at memory producers. Even though Infineon’s inventory levels have stabilized towards the end of the quarter, the company expects a continued low price level for memory products during the next quarter.

The mobile handset market further deteriorated during the third quarter of fiscal year 2001. Although Infineon expects a reduction of the high inventory levels with regard to the Christmas business the company currently sees no clear signs of recovery in mobile phone demand. Infineon also expects that the current downturn of the semiconductor market, coupled with the slowdown of the global economy, especially in the United States, will continue to negatively affect Infineon’s Wireline Communications and Security & Chip Card IC businesses. However, Infineon expects its Automotive & Industrial components business to continue to benefit from a strong customer base as well as from the ongoing industry trend towards more advanced automotive electronics.

Infineon has already implemented a range of measures to mitigate the financial impact of the current downturn of the market, such as the reduction of capital expenditures by Euro 500 million to Euro 2.3 billion for the current fiscal year and by more than one billion Euro for fiscal year 2002, as well as implementing cost reduction programs including a hiring freeze.

Infineon intends to use the proceeds of approximately Euro 1.5 billion from its recent public offering to fund future capital expenditures and potential acquisitions as well as for working capital and other corporate purposes. “Our public offering, in combination with our reduction of planned capital expenditures for the current and next fiscal year and the cost cutting measures we have implemented, will enable us to continue to fund cutting edge research and development as well as to implement our aggressive productivity roadmap, especially our leadership in 300mm technology”, concluded Dr. Schumacher. “With these measures, we will be in a strong competitive position to benefit from any upturn in the semiconductor industry.”

TSYS 2Q/01

TSYS reported net income for the second quarter of $26.0 million on revenues of $162.5 million compared to net income of $24.3 million on revenues of $150.5 million for 2Q/00. TSYS’ revenues do not include Vital Processing Services revenues. Bank card processing revenues for 2q/01 were $141.1 million, an 11.9% increase over last year. TSYS currently has 202.1 million accounts on file. During the second quarter, TSYS entered the EBT arena with the signing of a multi-year agreement with Lockheed Martin IMS to provide transaction processing, settlement and recipient call center services to meet Lockheed’s EBT needs. Internationally, TSYS is processing about 23 million accounts on file, is awaiting the last portion of the Royal Bank of Scotland’s portfolio conversion to be completed this quarter. For complete current and historical data on TSYS visit CardData ([][1]).


NCR 2Q/01

NCR Corporation reported this morning that 2Q/01 revenue increased 4% from the year-ago quarter to $1.50 billion. Retail Store Automation operational improvement was driven by 8% revenue growth, revenues from new products and a heightened focus on operational efficiency while the Financial Self Service unit achieved revenue growth of 8% with broad-based geographic growth, particularly in the Americas. NCR notes that its Teradata Data Warehousing business posted the second-highest revenue quarter in its history due to solid growth from other industries. For complete current and historical details on the NCR visit CardData ([][1]).


Citibank 2Q/01

Citigroup reported this morning that income for its North American card portfolio rose 17%, driven by 12% growth in receivables and a 95 bps increase in the net interest margin, more than offsetting a 119 bps deterioration in the net charge-off ratio to 5.51%. However charge volume was essentially flat for the second quarter, at $55.6 billion. Core pre-tax income for Citi’s cards hit $725 million compared to $621 million for 2Q/00. Receivables increased from $92.3 billion to $103.9 billion over the same period. However both charge-offs and delinquency rose significantly. Delinquency (90+ days) increased 37%, from 1.26% for 2Q/00 to 1.72% for 2Q/01 while charge-offs increased from 4.32% to 5.51%. For complete details on Citigroup’s 2Q/01 credit card performance as well as historical statistics visit CardData ([][1]).

2Q/01 1Q/01 4Q/00 3Q/00 2Q/00
EOP RECV: $103.9b 100.5 103.2 97.7 92.3
Q VOL: $55.6b 51.2 56.8 55.2 55.3
ACCTS: 94.1m 93.2 90.8 89.4 83.9
CHG-OFFS 5.51% 4.84% 4.22% 3.95% 4.32%
DEL (90+dy) 1.72% 1.84% 1.46% 1.34% 1.26%
Source: CardData (


STM 2Q/01

STMicroelectronics reported results for the second quarter and first half ended June 30, 2001.
Net revenues for the second quarter were $1,587.2 million, in line with the Company’s guidance range of
$1.55 billion to $1.6 billion contained in its news release dated June 14, 2001. In last year’s second
quarter the Company reported net revenues of $1,877.3 million.

The Company experienced a significant amount of end-of-period order push-outs and cancellations,
reflecting accelerated weakness in certain of its end markets, particularly telecom and computer
peripherals. As a result, the Company has incurred a second quarter excess inventory pre-tax charge
of $70.7 million. Excluding the effect of this special charge, gross margin for the second quarter of 2001
was 38.0%, as previously anticipated. Including the effect of the charge, gross margin for the period was

At the end of the second quarter, ST took further actions to better align existing resources with
changing market conditions. Consequently, the Company recorded a second quarter impairment and
restructuring pre-tax charge of $311.3 million, primarily comprised of asset impairment charges relating
to certain of its 6″ wafer fabs and to goodwill. This includes the previously-announced charge relating
to the closure of its Ottawa manufacturing facilities, which amounted to $40.3 million.
Pro Forma Second Quarter Results Excluding Restructuring and Excess Inventory Charges
Second quarter net revenues of $1,587.2 million declined 15.5% and 17.4% from last year’s second
quarter and the first quarter of 2001, respectively. Revenues from differentiated products equaled
$1,024.0 million and represented 64.5% of net revenues.

ST maintained its product portfolio, application and geographic balance in the second quarter. With
differentiated products accounting for 64.5% of net revenues, the remaining contributors were Logic &
Memories, which represented 19.1% of second quarter 2001 revenues; Discretes, which accounted for
10.9%; and Standard & Commodities equaling 5.4%. In terms of applications, telecom represented
32.7% of second quarter 2001 net revenues; computer accounted for 20.9%; consumer was 19.3%;
automotive was 11.4%; and industrial, which includes Smart Cards, represented 15.8%. In the 2001
second quarter, the applications showing the best relative performance on a comparative
year-over-year basis were: automotive, up 2.5%; industrial, up 5.2%; and telecom, which declined by a
modest 3.2%. As anticipated, consumer revenues were significantly below second quarter 2000 levels,
declining 40.4% and computer was down by 20.0%.

Automotive was also the best relative performing application on a sequential basis, posting a 4.7%
decrease over first quarter 2001 levels. Conversely, computer, telecom and industrial reported
sequential declines of 21.0%, 20.0% and 13.8%, respectively. The 18.0% sequential decline in the
consumer sector primarily reflected lower sales of non-volatile memories and standard products to this
market. Revenues from the digital consumer market, however, were basically flat on a sequential basis.
Geographically, Europe accounted for 35.9% of second quarter 2001 revenues; Asia/Pacific for 33.4%;
North America was 18.3%; Japan was 7.0%; and Emerging Markets equaled 5.4%. The greatest
year-over-year declines took place in North America, down 35.3% and Asia/Pacific, down 14.8%. The
greatest sequential decline was in Europe, down 23.2%. Asia/Pacific, North America and Emerging
Markets declined 15.5%, 15.2% and 14.9%, respectively, from first quarter 2001 levels, while Japan
grew 3.2% in the same period.

Pasquale Pistorio, President and Chief Executive Officer commented, “Second quarter revenue
performance reflected the very difficult business conditions that have negatively affected several of our
end markets. Within this industry downturn, however, and based upon currently available data, we
believe that ST has continued to perform relatively better than the market and to gain market share.”
Gross profit for the second quarter was $603.3 million compared to $875.7 million in the similar
year-ago period. Gross margin of 38.0% was achieved despite the steep decline in order shipments
and production slowdown in the last part of the quarter. In the 2000 second quarter the Company
reported a gross margin of 46.6%.

Mr. Pistorio said, “As we noted at the time of our June 14, 2001 guidance, the under-utilization of
several of our 6″ wafer fabs, and abrupt pricing changes affecting certain of our product families, took a
toll on second quarter gross margin.”

Selling, general and administrative expenses were $180.2 million for the 2001 second quarter, including
an additional bad debt provision of approximately $14 million. Selling, general and administrative
expenses were nearly flat on an absolute basis, but increased as a percentage of revenues compared
to the year ago quarter.

Research and development expenses totaled $255.7 million, or 16.1% of net revenues. This compares
with $245.1 million, or 13.1% in the comparable year ago period.

Other income of $22.7 million included a $12.5 million investment gain.

Pro forma operating income was $190.1 million, or 12% of net revenues compared to $415.8 million, or
22.1% of net revenues in the similar year-ago period. Pro forma net income for the 2001 second quarter
was $154.5 million. Pro forma fully diluted earnings per share were $0.17 compared to $0.37 reported in
the second quarter of 2000.

Pro Forma First Half 2001 Results

Net revenues for the first half were $3,508.3 million, a decrease of 2.0% from the first half 2000. Gross
profit was $1,459.1 million, or 41.6% of revenues. Operating profit was $602.5 million, or 17.2% of
revenues. Pro forma net income was $495.3 million, or $0.54 per diluted share.
Research and development expenditures were $527.8 million, compared to $480.2 million in the 2000
first half. As a percentage of sales, R&D expenses rose from 13.4% to 15.0%. Selling, general and
administrative expenses were $356.9 million, or 10.2% of net revenues.

Second Quarter and First Half 2001 Results on an As-Reported Basis

Net revenues for the second quarter of 2001 were $1,587.2 million. Gross profit was $532.6 million, or
33.6% of net revenues. The operating loss for the period was $191.9 million. The net loss for the quarter
was $164.5 million, or $0.18 per diluted share.

Net revenues for the first half of 2001 totaled $3,508.3 million. Gross profit for the first half was $1,388.4
million, or 39.6% of revenues. Operating income was $220.4 million, or 6.3% of net revenues. Net income
was $176.3 million, or $0.20 per diluted share.

Balance Sheet Highlights

At June 30, 2001, cash, cash equivalents and marketable securities totaled $2,194.9 million; long-term
debt was $2,573.8 million (89% of which consists of convertible debt). Shareholders’ equity was
$6,156.9 million. Capital expenditures were $497.5 million in the second quarter and $1,227.1 million in
the first half of 2001. This compares with capital expenditures of $808.5 million and $1,430.6 million in
last year’s second quarter and first half, respectively.

Summary & Outlook

Commenting on second quarter results, Mr. Pistorio noted, “The difficult market environment that
persisted during the period was characterized by abrupt changes in end-market demand that
translated into significantly impaired order visibility with shipment postponements and cancellations. In
response to the deteriorating industry conditions, ST took actions designed to further enhance the
Company’s competitive position, both over the short/intermediate term, as well as the longer term and
that are in keeping with the Company’s strategic direction.”

ST has implemented a hiring freeze and has taken corporate-wide measures to reduce SG&A
expenditures. In fact, headcount has been reduced by about 1,500 people since the beginning of the
year as a result of attrition. Additionally, the Company has initiated short-term, temporary shutdowns at
certain of its 6″ wafer fabs.

Looking ahead, Mr. Pistorio continued, “Industry analysts are currently estimating a decrease in
semiconductor revenues for the markets we serve of between 10% and 15% for the first half of 2001
compared to the first half of 2000. ST’s year-over-year first half 2001 revenue decline of 2% illustrates
our continued ability to outpace the market by a meaningful margin.”

“On the other hand, we recognize the unique characteristics of the current industry downturn and the
unprecedented poor visibility of the near term demand that is part of this cycle. Therefore, it is difficult to
provide guidance with respect to subsequent quarters.

“Based upon today’s available information, we believe that the industry will bottom-out in the third
quarter of 2001, and we expect that ST’s revenues for that period will decline sequentially by
approximately 10% to 15% from 2001 second quarter levels. Gross margin for the third quarter of 2001
is likely to be in the range of 32% to 36%, reflecting continued price pressure and lower plant utilization
rates,” Mr. Pistorio said.

Mr. Pistorio noted, “In the fourth quarter of 2001, we expect our revenues and gross margin to improve
on a sequential basis. This projection assumes inventory workdowns in several of our key end markets,
but continued pricing pressures affecting certain product families due to industry overcapacity.
Additionally, we could see improved operating profitability resulting from cost reduction programs
implemented earlier in the year.”

“ST’s management is continuing to assess and evaluate our resources, headcount, operating
expenses and physical assets within the context of the projected timing of an industry recovery. With
future market conditions difficult to project, ST’s strategy is to take those actions necessary to ensure
its competitive position, in terms of products, strategic and key customer relationships and worldwide
manufacturing efficiency,” Mr. Pistorio said.

“At the same time,” Mr. Pistorio added, “the Company is moving forward with its System-on-Chip
solutions which give significant leadership advantages to ST as the convergence of technologies and
applications continues to evolve. The strength of our balance sheet provides ST with important
flexibility. Additionally, the Company has the leading-edge manufacturing infrastructure in place to
respond effectively to developing market requirements.”

Products, Technology & Design Wins

During the quarter, ST sustained its high flow of innovative new products and also entered into a
number of new agreements designed to reinforce its leadership in key areas such as broadband
access and multimedia.

In the digital consumer arena, ST and Alenia Spazio signed an agreement to co-operate in the field of
interactive broadband satellite networks for multimedia applications. ST has become a partner in
Alenia’s EuroSkyWay project, which aims to provide a new generation of satellites for Internet and
interactive TV services.

New products introduced for the digital consumer field included a single-chip demodulator for digital
terrestrial TV, and the world’s most advanced HDTV (High-Definition TV) decoder chip featuring
multiple stream MPEG video decoding.

In the communications field, ST introduced a number of significant products implementing VoIP (Voice
over Internet Protocol), which are a result of ST’s cooperation with Netergy Networks. For cable-based
VoIP, ST began delivering a multi-channel VoIP processor designed to work in conjunction with ST’s
DOCSIS single-chip cable modem. The Company also launched a chipset for enterprise IP phones,
small gateways and other emergent products using VoIP technology.

For the xDSL market, ST introduced an ADSL modem chipset aimed at both laptop and desktop
computers that is the first on the market to employ a controller-less design with USB or PCI interface.
The Company also unveiled a new ADSL central office chipset that integrates eight ADSL channels. ST
also demonstrated a working prototype of its Zipper-DMT VDSL modem technology that will combine
the very high bandwidth of VDSL with ADSL spectrum compatibility.

Other major announcements in the communications field included a new silicon-germanium BiCMOS
process tailored for cost-sensitive wireless applications. The new process provides all the
performance advantages of silicon-germanium at a cost that is marginally higher than that of a
standard BiCMOS process. The Company was also awarded an important design win by a major
customer for a US-TDMA RF transmitter in BiCMOS6M (0.35-micron) technology and a stereo audio
front-end. ST signed an agreement with specialist IP developer IDEX to jointly develop an innovative
biometric module combining fingerprint recognition and on-screen navigation features for mobile
Internet applications. ST also formed an agreement with Onix Microsystems Inc. to co-develop and
manufacture chipsets containing mirrors realized on ST’s micro-electro-mechanical systems (MEMS)
technology for use in Onix’s all-optical switching solutions.

In the computer peripherals field, notable announcements included a new generation of display engine
ICs aimed at the rapidly growing markets based on flat panel displays. ST also began sampling a new
CMOS read/write channel chip for hard disk drives that reduces power consumption increases overall
data transfer speeds and allows drive manufacturers to cut manufacturing costs. In the printer field, ST
started volume production of a digital printer engine in 0.18-micron technology, producing some three
million units in the quarter.

In the field of PC graphics, several manufacturers announced PC add-in boards based on ST’s KYRO
II(TM) 3D graphics accelerator, which is based on Imagination Technologies PowerVR(TM)
technology. Additionally, ST and Imagination also announced an extension of their partnership to
develop next-generation PC graphics technology.

In the automotive sector, ST began to sample a high-power system-on-chip device designed for
‘mechatronic’ applications where the electronics section is physically integrated with mechanical
elements. The first design win for this device is for a turbocharger application to be mounted on cars
manufactured by DaimlerChrysler. ST also won a large volume order for a navigation system for
aftermarket and OEM applications and received the first production orders for the XM Satellite Radio
receiver ICs.

In the industrial field ST, began volume shipments in Japan of smartcard microcontrollers for the first
EMV (Europay, Mastercard, Visa) credit cards.

During the quarter, ST continued the rollout of its innovative application-specific Flash products.
Samples of a 64Mbit device built in 0.15-micron technology and optimized for cellular phones were
delivered to a leading mobile phone manufacturer, while leading automotive manufacturers received first
samples of a 16Mbit device dedicated to engine control applications and new 8Mbit devices for
Firmware Hub PC BIOS were sampled to all major PC players.

Also during the quarter, in the rapidly growing area of e-Business via the Internet, ST further
strengthened its infrastructure by fully automating its RosettaNet-compliant Dynamic Replenishment
Process and completing the set up of a personalized portal that provides ST’s customers with
enhanced supply-chain visibility.

About STMicroelectronics

STMicroelectronics is the world’s third largest independent semiconductor company. The Company
shares are traded on the New York Stock Exchange, on Euronext Paris and on Borsa Italiana, Milan.
The Company designs, develops, manufactures and markets a broad range of semiconductor
integrated circuits (ICs) and discrete devices used in a wide variety of microelectronic applications,
including telecommunications systems, computer systems, consumer products, automotive products
and industrial automation and control systems. In 2000, the Company’s net revenues were $7,813.2
million and net earnings were $1,452.1 million. Further information on ST can be found at

STMicroelectronics N.V.


(See Pro Forma adjustments listed in the table below)

(in millions of U.S. dollars, except per share data ($))

FDC 2Q/01

First Data Corp. reported this morning that operating margins across its Payment Services, Merchant Services and Card Issuing Services units, exceeded 20% for the second quarter. Card Issuing Services posted operating profits of $85 million, an increase of 5%, while revenue of $376 million was relatively flat. During 2Q/01 FDC completed the acquisition of PaySys International. Payment Services reported that revenue was up 18% to $668 million and profits up 22% to $192 million. Worldwide Western Union money transfer transactions increased 23% to 26.3 million. International money transfer transactions increased 45% year over year. Merchant Services had revenue of $525 million, a 20% boost compared to the same period last year. Merchant acquiring volumes and transactions both grew 10% for the quarter. The TeleCheck business handled more than 16.9 million ECA transactions. FDC’s eONE Global business, formed last fall, reported $20 million in revenue for the second quarter, primarily from its government payments business, now known as govONE Solutions. For complete details on FDC’s second quarter performance visit CardData ([][1]).



Elva Inc. has completed a consolidation of shares at a ratio of 1 for 10 and the stock is now trading under the symbol “EVAI” on the OTC Bulletin Board. ELVA International, Inc., is a leader in the self-powered acoustic smart card industry. ELVA’s patented VocaliD smart cards supply secure online access and transactions from any phone set, cellular or computer without requiring card readers. VocaliD transmits pseudo random audio sequences in order to guarantee highly secure authentication during each use. ELVA owns six smart card technology registered patents in Europe, USA, Canada and Japan. A VocaliD smart card transmits pseudo random audio sequences in order to guarantee highly secure authentication at each use, from any place in the world. VocaliD is also a standard format card that meets any mag stripe based payment and loyalty infrastructure requirements while being compliant with major traditional chip card based technologies.


Hitachi announced it will close its SIM card factory in Ryuo City in Yamanashi Prefecture due to the European mobile phone slump. Hitachi indicated it will continue production of SIM card chips at its two other plants in Japan. The company started the Yamanashi plant in January after investing 30 billion yen for its construction. Hitachi’s production of SIM card chips has declined from 22 million units per month to 13 million.

TSYS – Lockheed

Adding a new dimension to its existing suite of offerings, TSYS signed a multi-year agreement with Lockheed Martin IMS to provide various processing services to meet Lockheed’s electronic benefits transfer needs. TSYS, with its new Integrated Payments Platform, will assist LMIMS in providing transaction processing, settlement, and recipient call center services to LMIMS clients. This agreement with LMIMS solidifies TSYS’ entry into the EBT market.

The U.S. federal government has mandated that by October 2002, all federal funds be disbursed electronically, replacing paper coupons with plastic cards. Currently 41 states, the District of Columbia, and Puerto Rico have operational food stamp EBT systems, which represent the bulk of the EBT transactions. In 2001, 17.6 million people qualified for food stamp EBT benefits. An estimated 800,000 more recipients are expected in 2002.

The TSYS Integrated Payments Platform enables states to meet new federal requirements for electronic benefits programs such as food stamps, Temporary Assistance for Needy Families (TANF), and Supplemental Security Income (SSI), by providing quality and sustained system performance. The TSYS Integrated Payments Platform is a highly scalable processing platform with a redundant authorization system that allows for real-time benefit adjustments 24 hours a day, seven days a week. Unlike its competitors, TSYS has the ability to house multiple programs on one card, giving states flexibility in their program implementation.

In addition to the EBT programs, the Integrated Payments Platform supports the online and offline debit and stored value markets, giving clients access to all national and regional networks, ATM driving and switching services for online debit processing.

About TSYS:

TSYS brings integrity and innovation to the world of electronic payments. TSYS serves as the integral link between buyers and sellers in the rapidly evolving universe of electronic payments. With almost 200 million accounts on file, TSYS makes it possible for millions of consumers to use their credit, debit, stored value, commercial, chip and retail cards anytime, anywhere through any medium or portal. TSYS and its family of companies offer a full range of acquiring and issuing services from accepting electronic payments for goods and services, to credit applications, bankruptcy and collections. Based in Columbus, Ga., TSYS processes for 21 countries, in 11 currencies, in three languages and maintains operations in Canada, Mexico, Japan, and the United Kingdom. TSYS is an 80.8 percent-owned subsidiary of Synovus Financial Corp. (NYSE: SNV) ( ), No. 8 on FORTUNE magazine’s list of “The 100 Best Companies To Work For” in 2001. For more information, contact [email protected] .