Over 141 years Diebold Inc. has survived the Great Chicago Fire of 1871 (its patented safes and vaults kept their contents unharmed), John Dillinger and his gang (the company developed a tear-gas-discharging system for bank lobbies), and the scandals surrounding the "$64,000 Question" quiz show (which kept questions locked in a Diebold safe).

But the company, now the top U.S. manufacturer of automated teller machines, had a tougher time coping with the Y2K conversion and the wave of bank mergers in the late 1990s, both of which brought orders for its products to a crawl.

There were also other problems: difficulties in international expansion and a failure to recognize early on that retailers - not banks - were the growth market.

Diebold's stock plunged in 1998, and people started saying the company was losing ground to its top competitor, NCR Corp.

That was the setting when Walden W. O'Dell joined the company last November as president and chief executive officer. (In April he became chairman of the board too.) He knew the company needed a turnaround - and to polish its image. He also had big historical shoes to fill: one of his predecessors as board chairman was Eliot Ness, the famed law enforcement officer who retired from "The Untouchables" after busting Al Capone to oversee Diebold from 1944 to 1951.

Mr. O'Dell, 54, came to Diebold - which was based in Cleveland in Mr. Ness' day, but has since moved to North Canton, Ohio - from St. Louis-based Emerson Electric Co., where he had worked for 33 years. As president of Emerson's Liebert Corp. in Columbus, Ohio, which supplies air-conditioning systems designed to protect high-tech equipment, he turned a $400 million domestic producer into a $1.1 billion global supplier.

Diebold executives are hoping he can work the same kind of transformation for their company. Though Diebold is the leading ATM manufacturer in the domestic market, companies like Triton Systems Inc. and NCR are nipping at its heels, and NCR is tops internationally.

Diebold has had a rough time abroad. International Business Machines Corp. had been its distributor internationally through a joint venture, InterBold, but IBM pulled out in 1997. Since then Diebold has been building a distribution network of its own and hiring sales and service staff.

Mr. O'Dell says that international expansion will be critical for the company's success, and that some recent overseas acquisitions are one way to begin. "We are now well positioned in the global market, which we never were before," he said.

Last year, Diebold made a major dent in the international market when it bought Procomp Amazonia Industria SA, an ATM and software developer based in Sao Paulo, Brazil. With 2,300 employees and $400 million of revenues in 1998, Procomp was the top ATM manufacturer in Latin America.

This April, Diebold sealed its acquisition of the ATM-related assets of Getronics NV in Amsterdam and Groupe Bull in Paris. The deals set Diebold back approximately $160 million but were considered crucial to affirming its European presence, Mr. O'Dell said. "In Europe, our acquisitions plus the penetration we already had still do not give us the same share we have in Latin America," he said. "It's a solid share, but it leaves us at No. 3."

Jay P. Stevens, a senior analyst who follows Diebold at Buckingham Research Group in New York, said Diebold "had to go global."

"Diebold bought out IBM's shares," Mr. Stevens said. "They said one of their reasons was that IBM's sales force was not making the sales quotas that had been established."

Mr. Stevens has a "buy" rating on Diebold, signaling his confidence in a turnaround.

Mr. O'Dell said: "You have to look at what Diebold was in 1998: a U.S. company exporting through IBM without its own international charter in hand. We liked IBM. They're a great company. The problem was that Diebold was using a model that stopped working in 1965.

"Great businesses have to control their own destiny," Mr. O'Dell said. "We weren't. That's how we got into the box we were in."

That quandary expressed itself in ambiguous financials. Diebold's stock price rose steadily from 1992 to 1998, when it dropped. Since then performance has been jagged. "We lost a little share from 1992 to 1998, but the market was growing so fast it wasn't apparent," Mr. O'Dell said. "Then in 1998 to 1999, when the market slowed down, Diebold had problems adjusting."

Diebold's latest figures suggest a turnaround. Net income for 1999 was $129 million, up 69.2% from 1998. Sales topped $1.26 billion, up from around $1.18 billion. Yearend assets approached $1.3 billion, up from $1 billion at the end of 1998.

Gregory T. Geswein, who joined Diebold in March as chief financial officer, said, "We've got a great balance sheet." He added that the 1-to-10 ratio of net income to net sales "is a pretty high number when you compare that to other industries."

While acknowledging that recent acquisitions have depleted the company's free cash, Mr. Geswein assured investors, "We're fixing the working-capital situation now."

David Robertson, president of The Nilson Report, a card industry newsletter in Oxnard, Calif., said Diebold's uneven performance reflected a particular commercial situation that did not translate well on Wall Street. Diebold, like other manufacturers of full-service ATMs, had been shipping fewer newly manufactured machines. Diebold's decline reflected a focus on technology to upgrade existing machines instead of selling new ones, Mr. Robertson said.

"Wall Street can see that Diebold is not selling as many new machines, and the company begins to look like it's under siege," Mr. Robertson said. Still, Diebold's focus on upgrading was "a very successful customer-retention strategy," he said.

Mr. Robertson said Diebold's stock price did not accurately represent the company's worth. "The volatility that can hit the market can be based on the lack of understanding of the true market conditions," he said.

ATM upgrades are consistent with the second part of Diebold's strategy to increase market share: enhance technology while expanding distribution. "The U.S. market for traditional machines is pretty well served already," Mr. O'Dell said. "But what could drive some growth in the U.S. are new functionalities."

Banks are already trying to make their ATMs more relevant and useful by putting advertisements on them, offering voice guidance for the blind, and experimenting with biometric identification - all technologies that Diebold helped pioneer.

Last year Diebold purchased Nexus Software Inc., a Raleigh, N.C. software developer for banks and ATM networks. Nexus, formed in 1985, showed $11 million in sales for 1998. The acquisition represented an effort to keep innovating despite banks' sluggishness in adopting new technology for their ATMs.

One exception has been Wells Fargo & Co., which last year spent $20 million in the first quarter to Web-enable some of its terminals. "Wells did some [business] with NCR and did a tremendous amount with us," Mr. O'Dell said.

Other companies that have signed on to test Diebold's Web-enabling software include Union Planters Corp., Bank of America Corp., American Express Co., Western Union Financial Services Inc., and E-Trade Group Inc.

Buckingham Research's Jay Stevens predicted that Diebold will soon be the beneficiary of an industrywide effort by banks to upgrade their ATMs in various ways.

"Do you use an ATM? Yes? Has that ATM changed in the last five or 10 years? No? That's the point," Mr. Stevens said. "Machines have stayed the same; technology has gone ahead."

But "Diebold's got everything ready," he said. "They're just waiting to take the orders."

Mr. O'Dell said that when he joined the company, there seemed to be too few people to take orders. Part of his plan was to restructure the company and establish a separate North American division analogous to the other international business units.

"The U.S. wasn't getting enough focus," Mr. O'Dell said. "The only one responsible for the business in the U.S. was me. I can't do that and the global job and the CEO job. We needed someone with e-commerce and operations management experience, and that experience was not to be found in the company."

Recently, Diebold named Wesley B. Vance president of the new division. "With Wes, all the ingredients were in one place," Mr. O'Dell said.

Mr. Vance, who will join the company October 1, leaves the automobile parts manufacturer ArvinMeritor Corp. of Columbus, Ind., where he had worked 10 years, most recently as a senior vice president of the company and president of its exhaust systems group.

"Diebold is very attractive to me," said Mr. Vance, who will join it Oct. 1. "Where I've been in the recent past is what I've considered to be part of the old economy. Diebold works on both frontiers - it's got a manufacturing element but is also taking advantage of the new economy."

Diebold has a history of innovation: By 1870, the company founded by Charles Diebold, a German immigrant, had 67 patents on different kinds of safes.

"On one front, it's an old type of business," Mr. Vance said. As for the modern era, "We've been dealing with electronic data for a long time, but we're all discovering what's evolving. It's not so much an issue of 'Do you have the experience?' but 'Are you familiar with the market, and can you adapt that information to the company?' "

Meanwhile, Diebold is trying to catch up on an important development it had been slow to recognize, the shift from bank-operated to retailer-operated ATMs. Last week the company unveiled an ATM franchise program that would allow retailers to run the machines with their own cash while paying Diebold a monthly fee.

"We were very successful on the banking side, but not particularly successful on the retail side," Mr. O'Dell said. "It may have been that we didn't have the right product or the right marketing program; it may have been both. But we're working to correct those issues."

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