Growth in automated teller machine shipments almost came to a halt last year, a stark indication that an end may be near to the ATM industry's long boom.
The number of terminals shipped worldwide rose only 4%, after 25% growth in 1997, according to an annual survey by The Nilson Report.
Manufacturers shipped 170,498 units in 1998. The increase was 6,097, versus 31,283 the year before.
ATM deployers, particularly in the United States, have long been alert to signs of market saturation. Transactions per machine have been trending downward, accelerated recently by an explosion of low-cost cash dispensers at shopping malls, convenience stores, and other nonbank locations.
Now the trend is extended to growth in ATM shipments, which has not dipped so drastically since the early 1990s, the last recessionary period.
Off-premises installations fueled the 1997 surge in machine shipments. These tapered off, as most of the prime locations had been spoken for.
David Robertson, president of The Nilson Report, a newsletter based in Oxnard, Calif., said ATM manufacturers had been counting on foreign markets to pick up the slack, but economic turbulence got in the way.
"The Asia crisis really crunched shipments," he said. "In the absence of an Asian crisis there would have been a strong year of sales."
Banks' preoccupation with year-2000 conversions also put a damper on ATM orders. Mr. Robertson said he anticipates a rebound in 1999 and 2000 as the Y2K problems are addressed and emerging markets recover, but the rates may not return to double digits.
Banks "are not buying a lot of new ATMs," said Ernest L. Burdette, president of Triton Systems Inc., a leader in production of off-premises machines. "They are more interested in their internal systems than that their ATMs are properly deployed for year-2000."
Among the top ATM manufacturers, results were mixed. NCR Corp. topped the Nilson list with 46,509 units shipped, up 10% from 1997. Diebold Inc.'s total of 26,286 was down 24%, and Fujitsu/ICL's 15,714 was off 3%.
Seimens Nixdorf was next, at 12,170 machines, up 42%, and Triton Systems rounded out the top five with 10,509, up 35%.
Diebold announced in mid-1998 that orders were down and laid off more than 600 workers at its Canton, Ohio, headquarters. The company, which does most of its business with U.S. banks, blamed mergers and year-2000 issues.
Thomas W. Swidarski, senior director of worldwide marketing at Diebold, said market saturation has prompted a strategy shift toward selling "entire banking solutions" that will "integrate terminals into the broader delivery systems of banks."
"We think the endgame is no longer just shipping ATMs," he said. "It's a much broader and bigger issue."
Diebold reported a decline in net income for 1998, to $76 million. Diebold confirmed the accuracy of the Nilson numbers but said it does not plan to make such figures public in the future because they paint only a partial picture of a business that includes upgrades and other services.
Diebold said last month that its business of upgrading machines was brisk, with 26,211 upgraded terminals shipped in 1998 and total "hardware revenue" of $500 million.
Mr. Robertson said most of Diebold's losses in U.S. sales were made up by the other top four manufacturers, each pursuing its own growth strategy.
Fujitsu, which reported a 12% jump in U.S. orders, to 3,156, said it aims to supply bank customers with ATMs that link to call centers and branches.
"We are going to have to do a better job of integrating ATMs into the total bank strategy," said Jeffery Lund, senior vice president of Fujitsu/ICL's financial services division, who is based in Atlanta. "We are focusing on integrating the ATM channel into the total bank solution."
Mr. Burdette of Triton said the key to growth is keeping prices down. Long Beach, Miss.-based Triton has released a cash dispenser that costs 25% less than its other units, which retail at $6,000 to $7,000.
"If you're a manufacturer, you have to be even more focused on the off- premises market than before," Mr. Burdette said.
For the off-premises market to break out of its sluggishness, Mr. Robertson said manufacturers need to offer cheaper machines that can turn a profit in marginal locations.
"In the U.S., you are going to see some real strength at the bottom of the market," Mr. Robertson said. "It is going to open up a whole new level of off-premises locations."