Chris Forrester, on 31-08-2008
Smart card specialists Kudelski Group (headed by Andre Kudelski,) moved from profit to loss in its latest half-year numbers, not helped by a 15% weaker dollar and consolidation in some of its key markets helping drive the company into loss at its digital TV encryption business. But there were high spots, not least a turnaround at its Open TV business.

Kudelski is busy morphing itself into what it describes as a “service mode” business, which CEO Andre Kudelski has said could lead to up to 30 million smart cards being shifted from a sales mode to a rental model. “Even if it leads to a significant shortfall in the immediate future due to revenues being carried forward, this migration is a real opportunity to add value to the new conditional access technologies in the coming years,” he said six months ago. His prediction was spot on. Seven million cards had been switched into this service/rental mode, but it will take a little longer for these revenues to materially assist Kudelski.

They were “weak results” said Landsbanki Kepler analyst Roger Steiner. "The loss in the core digital TV unit was substantially higher than expected."

Not mentioned in the company’s statement was the taboo word “piracy”, because it is piracy that has held the company back this past year or two, specifically at Premiere in Germany and at Echostar’s DISH network in the US.

“Total revenues and other operating income came in at CHF 424.2 million, which is slightly up compared to the first half 2007. The compounded annual growth rate for the first half year results in the period 2004 to 2008 was 11.4%. The 15% decline of the USD exchange rate against the CHF compared to first half 2007 had a negative impact on sales, operating margin and net income. At a constant first half 2007 exchange rate, total sales have increased by CHF 45.5 million, corresponding to 10.8% growth. The negative CHF 43.7 million exchange rate impact reduced reported growth to CHF 1.8 million,” said Kudelski’s statement.

New business wins were registered, with DTT contracted numbers doubling in the past year. “Both the IPTV and the mobile TV markets continued to generate new contracts however, still not translating into a material revenue base. Overall, net contribution from new business areas in the first half was still in the negative high single digit million range,” said Kudelski.

Source: Rapid TV News 2008

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