Diebold Inc., a leading manufacturer of automated teller machines, is blaming a slow U.S. economy and cuts in bank technology spending for lower-than-anticipated fourth-quarter earnings.
The Canton, Ohio, company said in a news release last week that it expects to post earnings per share of about 49 cents for the fourth quarter, after saying in October that they would be 52 to 56 cents a share. Diebold executives said they would not comment on the announcement before a conference call scheduled for Tuesday, when the company is to announce its fourth-quarter and yearend earnings.
But in the release, Walden W. ODell, Diebolds chairman, president, and chief executive officer, said, Clearly, the surprising magnitude and momentum of the slowing U.S. economy late last year, particularly in technology spending, had an impact on our fourth-quarter incoming business.
Diebolds statement contrasts sharply with guidance released Jan. 12 by NCR Corp. The Dayton, Ohio, company said that though revenues had slowed in its retail automation business, its ATM business had a solid quarter, with revenue up 5%. The company also said it expected operating earnings for the quarter and for the year to rise 33%.
Matthew Wolfersberger, first vice president of McDonald Investments Inc., said he was taken aback by Diebolds announcement, particularly in light of NCRs guidance.
Its the first Ive heard that the domestic economy has had a significant impact on technology spending by the banks, he said. Im surprised that a slowdown is occurring at all in ATMs. Id not expected ATM sales to drop off significantly at this time.
Diebolds stock closed at $28.44 on Friday, down 16% from a week earlier.
Diebold, whose 1999 revenues were $1.3 billion, in early January announced that it plans to close its metal processing facility in Staunton, Va., by the end of this quarter. The shutdown will cost 48 employees their jobs and the company $2.5 million to $3 million for various expenses.
Diebold said it plans to boost production for its overseas business through three recent acquisitions of ATM manufacturing companies in France and Brazil. Mr. ODell said Diebold will market its electronic commerce products and services more aggressively and increase its use of technology to streamline operations and cut costs.
The past few years have presented challenges at Diebold, which was founded in 1859 and now has about 11,000 employees in 80 countries. Its stock plunged in 1998 as the company grappled with a sales drop-off stemming from bank mergers and year-2000 conversion projects.
Kartik Mehta, a research analyst at Midwest Research, said Diebolds lower earnings are a domestic problem resulting from a slowdown in the economy that prompted U.S. banks to cut spending. But he said Diebolds situation could improve this year; it has positioned itself to take advantage of new technology and may benefit from more ATM use this year, he said.
Midwest Research is nearing completion of its annual survey of the nations top deployers of teller machines, and Mr. Mehta said preliminary findings indicate that machine sales and ad spending will rise in 2001. And he said nonbanks are expected to focus more on ATM use.
The initial read from our survey looks like 2001 will be a little better than 2000 in ATM purchases, he said. That could lead to upgraded activity that could help out Diebold in 2001.
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