March 20, 1997 1:45 PM ET

Motorola jumps on smart card bandwagon
By Scott Berinato

  Motorola Corp. today announced plans to enter the smart card business.

A new Motorola division, the Smart Card Business Systems Sector, will produce 32KB smart cards and smart card readers. The first products are due in the fourth quarter.

The unit will operate as a systems integrator, according to Mark Davies, the head of the new business unit. He also indicated that talks are under way with all the major smart card groups, as well as some larger banks and municipal governments.

Meanwhile, Motorola will forge ahead with the development of so-called contactless smart cards, which need only be a couple of feet from the reader to operate.

Security and encryption also will be contained on Motorola cards. Merle Gilmore, who heads up the company's mobile products sector, said this could provide users of cellular and mobile technology with a much higher level of security.

"We see smart cards evolving," Gilmore said. "First to contactless cards, and then very sophisticated multiapplication cards."

Company officials added Motorola would partner with software and application developers to create enterprise smart card systems.

Motorola's entry into this market is just another indicator that smart card use will explode as predicted, according to one analyst.

"They're not the only ones that smell blood," said Karen Epper at Forrester Research Inc., in Cambridge, Mass. "Virtually all the heavy hitters in the hardware and software world are circling smart cards like sharks: Microsoft [Corp.], Netscape [Communications Corp.], [Hewlett-Packard Corp.] They all see the opportunity."

Epper was nonetheless cautious about Motorola's initiative.

"Right now it's big talk. If they can back it up with the partnerships, the money and the system to support those plans, they'll have a very compelling offer," she said. "But I don't know that they can do 50 percent of what they said over the next two years."

Motorola has some experience in the smart card industry, having produced integrated circuits for smart cards for the last two decades.

Currently, 90 percent of the world's smart cards are used in Europe. Dataquest Inc. expects that percentage to decline to 40 percent by the turn of the century. By then, the San Jose, Calif., market research organization projects that the United States will account for 20 percent of the world's smart cards.

Motorola, of Schaumburg, Ill., can be reached at www.motorola.com.

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