The closing of an international joint marketing venture is coming back to haunt Diebold Inc.
The Canton, Ohio, maker of automated teller machines said last week that its second-quarter revenues had fallen 7%, to $280.5 million.
That helped produce a loss of $14.4 million, or 21 cents a share, compared with net income of $30.7 million, or 44 cents, a year earlier.
Banks' preoccupation with mergers and the year-2000 problem extended the sales cycle for many products, Diebold officials said. But they have also come to regret the lack of an overseas distribution channel.
International Business Machines Corp. had been Diebold's major reseller internationally through a joint venture called Interbold, which lasted seven years until IBM decided to pull out last year.
Observers said Diebold paid a favorable price in buying out IBM's stake but neglected to develop a distribution mechanism in its place. Overseas revenue accounted for about 25% of Diebold's $1.2 billion total in 1997.
During an investor conference call, Diebold chairman and chief executive officer Robert W. Mahoney said, "We made a mistake in allowing the IBM discussions to drag on too long.
"We are now moving forward with our plans for our own international distribution, which involves basically a model of direct sales representation for the major accounts and distributors for the middle market."
Diebold also recently undertook a "realignment" project, aimed at driving down costs by $22 million annually. In addition to eliminating more than 600 jobs through early retirements, the company would reduce its use of part-time contract workers, consolidate facilities, and write off certain assets and discontinued product lines.
That effort prompted a one-time, after-tax charge of $42 million, or 60 cents a share, in the second quarter. Excluding the charge, earnings per share would have been 39 cents.
Diebold's lack of an alternative international distribution plan came as a surprise, said Richard Sporrer, an analyst at Parker Hunter Inc., Pittsburgh.
"A lot of analysts thought they had one in place (but) that really wasn't the case," he said. "I wouldn't say they are starting from scratch, but they do have a lot to do. They think they can get it done between now and the end of the year."
Mr. Sporrer still rates the company a "buy."
The stock closed at $30.1875 per share Friday, down 45% from its Feb. 5 high of $55.3125.
NCR Corp., Diebold's chief rival in ATM sales, also reported a revenue decline but managed to exceed analysts' expectations.
Overall second-quarter revenue at the Dayton, Ohio, computer maker was $1.5 billion, down 4% from a year earlier.
Net operating income was $23 million, reversing a net loss of $19 million.
Per-share earnings of 19 cents exceeded the First Call analyst consensus by 4 cents.
NCR's stock closed at $34.25 Friday, up $1.8125 for the week.