Gemalto books EUR10 million provison against German date-change fiasco
13 January 2010 | 11655 views | 0
French smart card supplier Gemalto is to book an exceptional charge of up to EUR10 million in its 2009 results to cover financial claims stemming from a Y2K-related coding error that rendered millions of German payment cards unable to process the 2010 date-change.
The glitch - which affected as many as 30 million payment cards - left consumers unable to use their cards in cash machines and eftpos terminals around the country and also hit German cardholders travelling overseas.
In a statement, Gemalto says it has provided a "secure procedure to its customers in Germany to address the situation". The unspecified remedial measure was approved by the German banking authorities on 7 January.
Initially it was feared that the vendor would be forced to replace the affected cards, a move experts estimated could cost up to EUR300 million.
Olivier Piou, Gemalto CEO says: "This is a regrettable incident, and we are doing everything in our power to support our banking customers in resuming full normal operations. We worked with them hand-in-hand to create a strong secure software solution that enables our customers to resolve the problem of the concerned cards without reissuing these cards."
Nonetheless, the vendor is expecting a string of claims from retailers and banks relating to lost sales as a result of the malfunction.
Piou says Gemalto will take a special provision of EUR6-10 million to cover the "potential consequences related to this event". The charge will be booked as part of the vendor's 2009 results, reducing expectations of around EUR180 million adjusted Ebit for the year by the same amount.