Gemalto shares tumble after warning of $489 million charge

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Security software-maker Gemalto NV slumped after it announced a goodwill impairment charge of around 420 million euros ($489 million), leading to a brace of analyst downgrades.

Gemalto said after trading on Friday that operating profit for the first half is in line with expectations at 93 million euros, adding that the double-digit decline in its Americas payments and SIM businesses is set to continue.

Shares fell as much as 17.3 percent to 45.46 euros in Amsterdam trading Monday, the biggest drop since an earlier profit warning had caused the stock to crash on March 22, when company warned that the dip in demand from U.S. banks would cause it to scale back production of its security-filled credit card chips.

Gemalto said it expects to book a noncash goodwill impairment charge of approximately 420 million euros in the first semester of 2017, due to the weak prospects for the removable SIM market.

Christophe Quarante at Societe Generale cut Gemalto to a sell rating, while Stephane Houri at Natixis downgraded the company to reduce from neutral.

While the warning was expected due to doubts about the company delivering 75 percent of full-year profit in second half, the outlook cut is on a “very large scale,” Houri said in a note to clients.

Natixis dropped Gemalto’s price target to 38 euros, "more reasonable for a group facing a crisis of growth and with no visibility.”

Chief Executive Officer Philippe Vallee, who succeeded former long-running CEO Olivier Piou in September, has already faced a series of setbacks, taking over a company that’s been navigating a structural decline in chips for phones by diversifying into a range of security software — from passports to connected cars, to help safeguard them from hackers.

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