Diebold CEO Pushed Out Amid Disappointing Results

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Thomas W. Swidarski has stepped down from his positions as president and CEO of Diebold (DBD) and resigned from the company's board of directors under pressure from the board, a spokesman said.

His resignation was disclosed in an SEC filing Thursday along with fourth quarter results after a series of disappointments that have frustrated investors.

"There wasn't any one event that clearly precipitated the board's decision," says company spokesman Mike Jacobsen. "The board's rationale was based on the ongoing performance over the past several years, not just what we announced today."

It was a "tough" decision for the board to make, Jacobsen says. "The board respects Tom a lot."

The North Canton, Ohio, company posted a fourth-quarter loss from continuing operations of 12 cents a share, and income from continuing operations (a non-GAAP measure) of 45 cents a share. As of 10:00 a.m. Thursday, Diebold shares were down 7.93% to $30.07.

Part of the reason for the company's diminished results is a slowdown in ATM buying, says Wedbush analyst Gil B. Luria. Banks spent hundreds of millions of dollars to upgrade the machines last year ahead of a spring 2012 deadline to make those machines accessible to the blind. Those standards were set by the Americans with Disabilities Act.

"The regional banks in the U.S. bought a lot of ATMs in the first half of 2012, and Diebold mistakenly thought that they were going to continue" to do so, Luria says. "A lot of the banks in the U.S. slowed down their buying of ATMs... It's very disappointing that their earnings really haven't gone up in a long time."

Swidarski worked at Diebold for 17 years. He was initially named Diebold's president and chief operating officer in October 2005. In December of that year he succeeded Walden W. O'Dell, who resigned after six years as the CEO in the face of similar financial struggles.

To be fair, however, Swidarski made strides during his tenure to move Diebold past the physical machines and further toward managing a bank’s devices for it.

Early on in his career he took one of his head salesmen off some of the company's largest accounts and had that person improve customer service, according to an interview the former CEO gave Bank Technology News in October. 

Four years after his appointment, in 2009, the company had signed $75 million worth of contracts with its managed services business, offering all the back office processes and monitoring a bank needs to manage its ATMs.

A year later, Diebold inked roughly $150 million worth of those deals, and last year it grew this business to about $600 million.

Just last year, Toronto-Dominion Bank handed over the reins of its roughly 4,400 ATMs to Diebold. The company is monitoring those ATMs remotely with its OpteView Resolve software — as well as tending to those devices on the ground with its employees.

And this fall, under Swidarski’s leadership, the company announced that it was opening up two new data centers located in Richardson, Tex., and Manassas, Va. Previously, the company handled its managed services out of three data hotels near its headquarters.

Some of the first Diebold customers placed in those new data centers — one of which is located directly on Verizon's fiber optic network in the Lone Star State — went live in September.

Also in September, Diebold acquired Gas Tecnologia, a Brazilian internet banking, online payment and mobile banking security company that protects nearly 70% of the country's internet banking transactions. But this has not turned out as hoped.

“We continue to see ongoing activity delays in the Brazil business,” the company said in a press release announcing its preliminary fourth quarter earnings.

Diebold's executive chairman of the board of directors, Henry D.G. Wallace, will assume regular oversight of the company until a new CEO is hired. He's a former group vice president and chief financial officer of automaker Ford.

The company also said that it has promoted George S. Mayes, Jr. to its newly created position of chief operating officer. He was previously an executive vice president in charge of global operations at the company.

Swidarski was not made available to comment for this story.

Diebold will report its end-of-year results on Feb. 12.

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