Fingerprint Cards reports cost cutting and changing focus after tough 2017

Fingerprint Cards has issued its year-end report for a tough 2017, in which the company faced reduced demand and earnings, despite supplying approximately 40 percent of the fingerprint sensor-equipped smartphones shipped during the year, excluding Apple.

Non-recurring items led to an SEK 41 million (US$5.1 million) loss in Q4 2017, but CEO Christian Fredrikson called Fingerprint Cards’ quarterly underlying operating loss of SEK 10 million ($1.23 million) “absolutely not satisfactory.” The company’s equity to assets ratio of 66 percent at the end of 2017 is more satisfactory, he said, as is its cash position of SEK 920 million ($113.6 million).

Fourth quarter revenues were down 62 percent from the same quarter in 2016, and full year 2017 revenues fell 55 percent to SEK 2,966 million ($366.2 million), with a gross margin of 33 percent, down from 48 percent a year ago. This led to an operating profit of SEK 154.6 million, as the company’s operating margin tumbled from 39 percent in 2016 to 5 percent.

Weakening demand from the Chinese smartphone market is partly to blame, according to the report, but the global market for capacitive fingerprint sensors is changing.

“This market has very quickly developed into a mature mass market with increasing competition and decreasing prices,” says Fredrikson. “A tangible shift in our product mix in the second half of the year was also an important contributing factor to the decline in average selling price. Smartphones in the premium segment are now also being equipped increasingly with smaller and cheaper sensors. Overall, the average selling price of our products declined about 30 percent in 2017.”

In response, the company has begun a comprehensive shift to adapt its cost base to market conditions, including cutting 185 jobs, as previously reported. It will also redirect resources to growth areas, and expects sales other than capacitive fingerprint sensors for smartphones to double from 5 to 10 percent of its overall business in 2018.

Fedrikson said that half of Fingerprint Cards’ R&D investments are already dedicated to developing new biometric technologies, and he believes biometric smart cards are the application with the most potential for the immediate future. A company blog post earlier this week made the argument that 2018 represents a turning point for contactless biometric smart cards. He said the company is well positioned for the market, having established new partnerships in various parts of the value chain over the past quarter. He also noted that the automotive industry is a growth area for biometrics, and that its recently announced collaboration with Gentex, based on Fingerprint Cards’ ActiveIRIS technology, is an example of its strategic of broadening its biometrics portfolio.

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