Diebold Inc. reported strong fourth-quarter earnings growth driven by its core business of bank automated teller machines, as it laid out a confident blueprint for a year that increases focus on research and development and software and services.
On an unadjusted basis Monday, Diebold swung to a fourth-quarter profit after a large write-down in the prior-year period linked to its business in Europe, the Middle East and Africa. It reported a profit of $79.8 million, up from a year-earlier loss of $120 million. Revenue increased 7.5% to $850 million.
Shares in the ATM maker jumped 7% to $37.17 in recent trading, its highest level in more than three years.
Chief Executive Thomas W. Swidarski said Diebold closed 2011 "on a winning note" as its strategy to focus on services, software and innovation is beginning to pay dividends by meeting the needs of the company's quickly morphing markets.
He also said that the Diebold would be stepping up the company's investment in research and development this year to accelerate its growth driven by innovations. In recent years, ATM makers have advanced the machines to scan and interpret check amounts for deposits and identify customers with biometrics rather than a rudimentary personal identification number. The rub, however, with some of the innovations is that new technology can often mean higher costs for the financial institutions who buy the machines.
But Diebold's innovation in products and services would reduce financial institutions' operating expenses and help them attract new business, Swidarski said Monday.
He also pointed out that orders for its core financial self-service business jumped 17% in the fourth quarter with growth in all of its geographies. Revenue in that unit also increased 7.6% to $640.3 million in the latest period, together indicating robust demand at company's primary constituency of banking clients.
By comparison, revenue in the company's smaller security solutions segment dropped 6.5% to $170.7 million in the latest period. Its security segment has posted softer growth, partly because the business relies on banks building new branches, a trend that has slowed recently. In the latest quarter, revenue was down 6%.
Swidarski said Diebold would continue to reposition its security business, aiming to return to growth in the second half of the year.
Other ATM makers have increased focus on software and services lately also. Last week, rival NCR Corp. furthered its own transformation into a more software- and services-focused company by agreeing to sell off its money-losing DVD kiosk business. Its chief said at the time that the DVD-business sale was part of the "reinvention of NCR," as it becomes "a large software company inside of what was once known as a hardware-only company."
