ISMANING, Germany, Aug. 12 /PRNewswire-FirstCall/ -- SCM Microsystems, Inc. (Nasdaq: SCMM, Prime Standard: SMY), a leading provider of solutions that open the Digital World, today announced results for the second quarter ended June 30, 2008.

Revenues from continuing operations in the second quarter of 2008 were $6.5 million, up 40% from revenues of $4.6 million in the second quarter of 2007. Revenues for the first six months of 2008 were $13.0 million, down slightly from revenues of $13.1 million for the first six months of 2007. By product segment, second quarter 2008 revenues included $4.9 million from sales of smart card readers and other products for secure network and physical access, compared with sales of $3.9 million in the second quarter of 2007; and $1.6 million from sales of original equipment manufacturer (OEM) digital media reader technology, compared with sales of $0.8 million in the second quarter of 2007.

In the second quarter of 2008, sales of the Company's smart card reader products continued to be impacted by weak demand from U.S. government-based smart card authentication programs. Additionally, demand continued to shift away from external reader devices towards readers embedded within laptops and keyboards. Lower U.S. sales of SCM's smart card readers were offset by higher sales in Asia of interface chips for embedded readers, as well as strong sales in Europe of smart card readers, which were balanced across the enterprise, government and small business markets and distributed among several countries. Sales of CHIPDRIVE(R) business productivity solutions were once again strong in the quarter, and SCM's new contactless readers comprised a significant proportion of smart card reader sales.

'There were many signs in the second quarter that our strategy to diversify and expand our customer base is beginning to yield good results,' said Felix Marx, chief executive officer of SCM Microsystems. 'Increases in both sales levels and the number of customers in Europe indicate the success of our efforts to expand sales of our CHIPDRIVE productivity solutions into new geographic markets, and the effectiveness of market development activities in the enterprise and e-government sectors.'

Gross margin in the second quarter of 2008 was 43%, compared with gross margin of 29% in the second quarter of 2007. The increase in gross margin compared with the prior year primarily reflects higher revenue levels in the 2008 period, a more favorable mix of higher margin products, including CHIPDRIVE solutions, and product cost reductions.

Operating expenses in the second quarter of 2008, as reported in accordance with GAAP, were $5.1 million, including $0.2 million in severance costs, compared with $5.4 million in the second quarter of 2007, which included amortization of intangibles of $0.1 million and severance and other costs of $1.4 million related to the resignation of the Company's former CEO in June 2007. Higher base operating expenses in the second quarter of 2008 primarily reflect the recent investment in new sales resources in Latin America, Asia, Europe and the U.S. to support the Company's strategy to diversify and expand its sales base, as well as increased spending on new product development.

Operating loss for the second quarter of 2008, as reported in accordance with GAAP, was $(2.3) million, compared with operating loss of $(4.1) million in the year ago quarter.

Earnings before interest, taxes, depreciation and amortization (EBITDA) in the second quarter of 2008 was $(2.1) million, compared with EBITDA of $(3.9) million in the second quarter of 2007. (See reconciliation of EBITDA to GAAP accounting contained within this press release.)

As reported in accordance with GAAP, loss from continuing operations in the second quarter of 2008 was $(2.0) million, or $(0.13) per share, compared with loss from continuing operations of $(3.7) million, or $(0.23) per share, in the second quarter of 2007.

Cash, cash equivalents and short-term investments at June 30, 2008 were $28.0 million, compared with $28.7 million at March 31, 2008.

Strategic Update

'In May, we announced our strategy to target the worldwide financial services and enterprise markets with new contactless reader products,' said Marx. 'Contactless technology is changing the way people travel, work, and perform everyday transactions such as purchasing goods and services. SCM has a unique opportunity to establish itself as a significant provider of contactless devices for emerging applications, with our strong background in security, a talented and experienced team and an innovative vision. We have already delivered our first contactless reader, which in only one quarter has begun to generate significant sales.