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ID Data finally sells something smart

ID Data has finally announced a win for smart cards rather than traditional magnetic cards, which is a step in the right direction along a path to success that seems to get ever longer.

The struggling card manufacturer has signed a two-year $2.5 million (£1.52 million) contract to supply memory cards to Omantel, one of the Middle East's largest telecoms operators.

What is significant about this particular contract is that it is for smart cards, the newer chip-based cards, rather than traditional magnetic swipe cards, which are still widely used by banks and retailers.

ID Data (IDD) has been transforming itself into a designer and manufacturer of smart cards, but the take-up of smart cards has been far slower than it hoped, particularly with banks.

Recent wins announced by ID Data have tended to be for the magnetic swipe cards, such as its recent contract renewals with satisfied customers Tesco and the AA and an exclusive two-year £4.4 million contract to supply magnetic cards to Sainsbury, Barclaycard, BP and Debenhams for the new joint Nectar loyalty scheme.

Philippe Guerineau, director of telecom sales at ID Data, told Citywire that the deal was significant because it demonstrates the company's ability to win international deals for smart cards, and it vindicates its recent change in strategy to sell directly to customers.

Shares edged up 0.125p to 2.75p, valuing the business at just £5.3 million.

House broker Durlacher did slash its forecasts for ID Data in November, after the company said it had seen continued slow demand for smart cards.

Durlacher now expects revenues for the full year of £21.4 million, and profit before goodwill of £1.6 million. Pre-tax losses, including an exceptional charge of £1 million, will be £3 million. Next year, it has chopped £5.5 million off turnover expectations to £35.5 million with profits of £3.5 million and earnings per share of 1.7p.

Citywire Verdict:

As chief executive Peter Cox keeps bemoaning, the company is now valued at just 1.6 times next year's forecast earnings.

The whole of the card industry has been having a tough time, this is not just an ID Data problem, but there are initiatives coming through from MasterCard and Visa which should force banks to adopt the more secure smart cards in the next couple of years, and this should then drive retailers to adopt them also.

In the meantime the company, which has had to raise more cash to keep it going, is clearly out of favour and a pretty risky situation.

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