Inside Secure: Ripe for an IPO

Not much information has been escaping Inside Secure’s headquarters in Aix-en-Provence, France, the past few weeks.

The plucky no. 2 NFC chip supplier had always been eager to promote itself. But there’s been none of that of late, except for a couple of official press releases: No projections, no internal figures passed around to employees. No forward-looking statements.

If there is an information clampdown, it is apparently Inside’s effort to get its message straight as it prepares to present itself to investors in a public offering.

The time couldn’t be better for Inside to go public. The buzz on NFC technology continues to build. And Inside has a contract with one of the world’s largest smartphone makers, Research in Motion, to supply NFC chips for RIM’s planned rollout of BlackBerrys supporting the technology. RIM has ordered up to 20 million or 25 million NFC chips from Inside, though the full order isn’t finalized.

The chip supplier is working with other major handset makers as it vies with chief rival NXP Semiconductors for orders.

Inside is trying to break NXP’s early grip on NFC business from Google and such big Android phone makers as Samsung. NXP also is supplying NFC chips to Nokia for the handset maker’s Symbian smartphones and perhaps its forthcoming Windows handsets.

Much Larger Rivals
Another reason Inside is ripe for an IPO is that it needs capital–perhaps desperately so. While Inside and NXP are the only suppliers that are ready now with chips, most of the world’s largest semiconductor suppliers are preparing to enter the NFC market, including STMicroelectronics, Renesas Electronics, Samsung Electronics, Texas Instruments and, later, Broadcom, Qualcomm and Intel. There are others expected to join, as well, such as Sony, CSR and Marvell.

But compared with these multibillion-dollar chip giants, tiny Inside brought in just US$36 million in 2009. The company hasn’t released its 2010 results, but sources told me revenue more than doubled in 2010 as the economy recovered from the financial crisis.

That is still little more than a rounding error on competitors’ earnings reports.

The 2010 sales estimate does not include revenue from the smart card business unit of U.S.-based chip maker Atmel, which Inside bought last year.

Inside paid a base price of $32 million for the much larger Atmel business, which had revenue of roughly $100 million in 2010. The deal, which closed last September, called for Inside to pay up to $21 million more if the Atmel unit meets certain financial targets in 2010 and 2011. Inside probably won’t have to pay much of that $21 million.

The deal was a lifesaver for Inside not only because it gives the contactless chip supplier much needed smart card technology it can use for dual-interface bank cards that are expected to continue to be in high demand, as well as for secure chips in NFC phones.

The acquisition of the Atmel unit by the much smaller Inside also helped the chip vendor to coax another €50 million ($65 million) out of its venture capital investors–some of which have been backing Inside for years.

Spending the Cash
Without that infusion, Inside probably would have burned through its cash by the end of 2010. It spent at least €11 million ($15 million) on research and development alone in 2009, according to its filing with the French commercial court registry. That’s more than 25% of all its expenses and more than 40% of its revenue for the year. Inside CEO Rémy de Tonnac later told me the figure for research and development was actually €17 million for 2009, taking into account all R&D-related expenses.

This R&D will pay off, de Tonnac told me in January. But the expenses will only increase as Inside strives to keep its technology current and not allow its well-heeled competitors to surpass it.

Inside, which has never turned a profit in the 15 years since its founding, probably wouldn’t be able to tap its long-patient investors for more. The company, which lost just under €9.6 million (US$13.5 million) in 2009, did cut its losses by about two-thirds last year. But some of the investors are eager to cash out. And a sale of the company is unlikely, say observers. That makes an IPO the expected option. 

And much is at stake. Of course, projections from analysts for the size of the NFC market vary widely. One recent projection has it that NFC phones will reach 800 million by 2015.

Nearer to the present day, NXP estimates handset makers will ship 70 million NFC phones this year, using chips from all suppliers, doubling to about 150 million units in 2012. De Tonnac agreed with that last month, before he stopped making projections.

In a couple of years, wireless chipset suppliers, such as Broadcom, Qualcomm, CSR and Texas Instruments, are expected to incorporate NFC in their chips that also support variously Bluetooth, WiFi, GPS and other wireless technologies in smartphones.

This could cut demand for standalone NFC chips, such as those produced by NXP, Inside and several of the other chip makers, such as STMicroelectronics, Samsung and Renesas.

But it also could give Inside an opportunity, if it has intellectual property to license to the big wireless chip makers. Broadcom last year purchased the major company providing NFC IP to wireless chip makers, UK-based Innovision.

But there is no way Inside can raise the money it needs to stay competitive in the NFC and overall smart card chip markets without access to public markets—or a large company coming to buy it out.

Either way, I see Inside planning to milk the NFC buzz this year for all it is worth.


Insight: Apple’s Long Game Pays Off, Conquering Resistance to Apple Pay from Banks in Europe and Beyond

NFC TIMES Exclusive Insight – It’s coming up on six years since Apple announced its groundbreaking digital-payments service, Apple Pay. And while consumer adoption remains a work in progress, Apple has had considerable success gaining participation from banks and other issuers in what is now more than 50 countries worldwide.

Transit Agency in Canada Plans to Launch Mobile Ticketing, Citing Covid Fears

NFC TIMES Exclusive Insight – Another transit agency in Canada has announced it will enable mobile ticketing, along with reloadable contactless cards, citing in part the Covid-19 pandemic and the desire to reduce the use of cash, vending machines and customer interaction with agency staff.

Biggest U.S. Supermarket Chain Trials Contactless as Covid-19 Fears Increase Demand for ‘No-Touch Payments’

NFC TIMES Exclusive Insight – The announcement by The Kroger Co., the largest supermarket chain in the U.S., that it has begun trialing contactless payments in a subsidiary indicates that one of the last major holdouts among big U.S. merchants will eventually accept such NFC payments services as Apple Pay and Google Pay, as well as contactless bank cards.

Southern California Transit Agency to Sell Tickets Via Google Maps and Google Pay; Others Expected to Follow

NFC TIMES Exclusive Insight – There’s more evidence that popular trip-planning apps Transit, Moovit and Google Maps are seeking to expand further into mobile ticketin

Insight: Apple Buys Mobile-POS Firm as It Seeks to Expand Acceptance of Contactless Payments

NFC TIMES Exclusive Insight – In a move seeking to expand the base of merchants that can accept its payments service, Apple Pay, Apple has reportedly acquired Montreal, Canada-based mobile POS company Mobeewave, which could enable small shop owners, restaurants and street vendors, among others, to more easily accept contactless EMV cards and NFC mobile wallets.

Exclusive: Google Tests Mobile Ticketing Initiated in Maps App; Could Lead to Mobility-as-a-Service Offer?

Jul 23 2020

NFC TIMES Exclusive – Three small public transit agencies in the U.S. are quietly testing use of Google Maps and Google Pay to enable customers to first plan then pay for tickets. It’s believed to be the first pilots of its kind for Google, a move that could mean the search giant plans to compete with such popular trip-planning apps as Transit and Moovit, which are starting to enable public transit ticketing and payments, NFC Times reports.

Los Angeles Transit Authority to Support Closed-Loop TAP Card in Both Apple Pay and Google Pay

Jul 17 2020

NFC TIMES Exclusive Insight – The Los Angeles County Metropolitan Transportation Authority, or Metro, plans to introduce an Android version of its TAP closed-loop fare card, with a virtual TAP card for the Google Pay wallet, a Metro spokesman confirmed to NFC Times.

Uber Expands Mobile Ticketing to More U.S. Public Transit Agencies

NFC TIMES Exclusive – As expected, Uber today has expanded support for public transit ticketing in its app again, this time to a consortium of 13 small and mid-tier transit agencies in Ohio and Northern Kentucky–following two other U.S. transit agencies, in Denver and Las Vegas, which have already integrated with Uber–it was announced today. NFC Times had reported the planned move in late May. 

Open-Loop Fare Payments Rollouts Continue Post-Lockdowns, with Italy’s Fourth Largest City Latest to Launch Service

NFC TIMES Exclusive Insight – Another of Italy’s major cities has launched open-loop fare collection, with Turin enabling customers to pay for rides on its one-line metro and certain bus routes by tapping their contactless EMV credit and debit cards, along with smartphones and smartwatches supporting NFC payments services.

Calgary Transit Launches Mobile-Ticketing Service with Plans to Expand to Open Loop

NFC TIMES Exclusive Insight – Canada’s third largest city, Calgary, has introduced its first electronic fare payments service, offering mobile ticketing from a software-as-a-service platform provider, with plans to enable customers to pay for fares with their contactless EMV credit and debit cards and NFC wallets.

As E-Commerce Surges, Major U.S. Payments Networks Announce Plans to Expand Click to Pay Globally

NFC Times Exclusive Insight – As e-commerce continues to grow in importance as Covid-19 lockdowns ease, four major U.S. payments networks announced today they are laying the groundwork to expand their uniform e-commerce checkout platform internationally.

Transit Payments Company Head: Apple and Google Positioned to Take Bigger Piece of Payments Industry

NFC TIMES Exclusive Insight – The head of transit payments gateway and processor Littlepay said he believes that Apple and Google are well-positioned to take a “big bite out of the payment chain,” which could change their relationship with payments networks Visa and Mastercard from one of collaboration to one of competition.