Strong sales of advanced automated teller machines to a handful of big banks was one of the few bright spots in the fourth quarter at Diebold Inc.
The North Canton, Ohio, company said Wednesday that sales of ATMs slipped in almost every region and market segment, driving down both revenue and income in the quarter.
Tom Swidarski, Diebold's president and chief executive, said during a conference call with analysts to discuss the results: "The Big Three banks — Bank of America, Wells Fargo, and JPMorgan Chase — are aggressively deploying intelligent-deposit ATMs, with Bank of America being the furthest along."
However, though a few credit unions and small banks are also beginning to buy intelligent-deposit ATMs — machines that do not require an envelope for deposits and have technology to convert deposited checks into electronic images — few regional banks are following suit.
"There are some small pilots, but otherwise they are not engaged," Mr. Swidarski said. "The executives are under a lot of stress because of the economy. Demand in regional accounts continued to weaken during the quarter."
Midsize banks "remain conservative with capital deployments in this recessionary environment," he said, and consolidation in the banking industry is affecting service revenue, which accounts for about half the company's overall top line.
"We had an integrated services contract for $15 million with one bank," Mr. Swidarski said, "but the bank was purchased and now [the] contract is up in the air."
Though ATM demand in Brazil remains strong, Diebold reported declines in ATM shipments to Western Europe, Eastern Europe, Russia, and China. In Asia, ATM orders declined in the fourth quarter largely because China installed significant numbers of ATMs in advance of last summer's Olympic Games in Beijing, Mr. Swidarski said, and falling oil prices affected credit in Russia, prompting a decline in ATM shipments to Russian banks.
Gil Luria, an analyst at Wedbush Morgan Securities in Los Angeles, said, "Shipments to Russia and China declined worse than expected."
Midsize banks may not be under the same pressure that is affecting the top of the banking market, Mr. Luria said, but they are being very careful with their budgets. "They are holding onto their purse strings because they are fearful about the future," he said.
In the fourth quarter Diebold reported total revenues of $822.9 million, down 6% from the year earlier. Net income of $5.9 million compared with a loss of $10.1 million.
For the full year, Diebold reported total revenues of $3.2 billion, up 8% from 2007, and net income of $93.5 million, or $1.41 per share, up 136%.
Mr. Swidarski offered a gloomy outlook. Revenue is expected to be down 2% to 10% this year, and earnings per share are expected to be $2.07 to $2.36.
"As we look ahead, we believe the global economy will remain extremely challenging throughout 2009," he said.
To prepare for a difficult period, Mr. Swidarski said, the company is holding salary increases for some people, cutting its advertising budget, reducing travel, and trimming the company's 401(k) match.
Last year, Diebold cut its work force by 800, or 5%, and more job cuts may be in the works, he said.
"As 2009 progresses, we will continue to evaluate head count levels and take additional actions as necessary," he said. Last November, Diebold announced that it had eliminated $100 million of expenses from its cost structure, and it set a goal of eliminating another $100 million by 2011.
