ATM Shipments Growth Slows

  Shipments of ATMs in the United States the past few years were driven in large part by banks replacing older machines that comply with new data-encryption standards. This trend appears to be slowing, as more banks now appear to be in compliance, according to the results of a recent survey by ATM&Debit News.
  ATM&Debit News reports that U.S. ATM shipments grew by 9.3% last year, to 72,136 from 65,9994 in 2004. That compares with a 17.5% growth rate from 2003 to 2004.
  The growth in shipments, however, was not helped by the largest ATM maker, Diebold Inc. The North Canton, Ohio-based company experienced an estimated 5% decline in shipments in 2005, to 17,180 ATMs from 18,084 in 2004. Diebold executives told investors during the company's year-end earnings conference call that firm's fiscal 2005 ATM revenues were affected negatively by a decline in sales to regional U.S. banks.
  Diebold's main competitor, NCR Corp., appears to have captured market share from Diebold, says Andrew Orent, vice president of the Dayton, Ohio-based terminal maker's Financial Solutions Division, Americas region. "Last year, NCR picked up a huge amount of U.S. business in terms of ATM product and services," he says.
  NCR shipments were up 30%, to an estimated 15,869 in 2005 from 12,220 the previous year.
  While a small number of banks and retail deployers have yet to upgrade their ATMs to accommodate the new encryption standard, called Triple DES, the migration is now almost complete at banks, says Kartik Mehta, an analyst with Cleveland-based FTN Midwest Securities Corp.
  As such, Mehta says NCR and Diebold will experience flat growth in U.S. ATM shipments this year. Diebold said in its fourth-quarter results that, because of declining ATM prices, it does not expect the market to recover until 2007 or 2008, by which time banks are expected to begin purchasing ATM hardware and software for imaging checks.
  To help improve its service offerings, such as its maintenance business, says Ken Justice, Diebold vice president of global product marketing. Last year, Diebold bought Fujitsu's U.S. ATM hardware service business.
  NCR is targeting merchants that have not replaced outdated ATMs yet. Following NCR's acquisition of Houston-based Tidel Technologies Inc.'s cash-dispenser unit in January, NCR now has the largest U.S. installed base of ATMs, Orent says. Sherry Marsh, marketing manager at Tidel EasyPoint ATM, says that, with its low-price products, Tidel hopes to pick up replacement orders from retailers with small transaction volumes.
  Bill Nuti, NCR president and CEO, said in a fourth-quarter earnings call that he expects the first half of 2006 to have weak ATM sales revenues because of weak pricing.
  NCR last year signed a five-year deal with Dallas-based 7-Eleven Stores Inc. for advanced ATMs, called Vcoms, with check-cashing and bill-payment capabilities. Last month, Citibank announced a deal in which it will brand about 5,500 7-Eleven ATMs in 31 states, including about 1,000 Vcoms, which cash checks and dispense money orders and cash. Vcoms do not accept deposits.
  NCR also gained new contracts to supply ATMs to SunTrust Bank and First Citizens Bank. The SunTrust and First Citizens deals represent NCR's aggressive stance toward Diebold.
  "We took SunTrust and First Citizens away from our competitor," says Orent, attributing NCR's growth to greater sales efforts and interest in ATM check imaging. Of the 135 U.S. ATMs that offer check imaging, 130 were supplied by NCR, he adds.
  Last year, Diebold's ATM deals included orders from Suncoast Schools Federal Credit Union and Consumers National Bank. In November, Tampa, Fla.-based Suncoast launched the first U.S. trial of Diebold's deposit-automation technology using Diebold's Opteva ATMs. Suncoast says it will add the technology to its 200 Diebold ATMs by mid-2006.
  Last year, two ATM vendors exited the U.S. market. Fujitsu, which shipped only 125 ATMs in the U.S. in 2005 compared with 738 units a year earlier, is focusing instead on the more lucrative Far East market, according to U.S. marketing manager Kent Schrock. A spokesperson for Lipman Electronic Engineering said the Israeli-based point-of-sale terminal vendor is getting out of the ATM business.
  Among ATM vendors serving the retail market, Long Beach Miss.-based Triton, the largest U.S. maker of basic cash dispensers, had its best year ever in 2005. Though Hurricane Katrina cost Triton three weeks worth of sales, it increased shipments by 21% domestically.
  Triton attributes some of that growth to increased sales to banks-the traditional NCR and Diebold market. "We've seen that many banks are ordering ATMs, which were historically bought by ISOs or retailers," says Triton President Brian Kett.
  Both Triton and Fremont, Calif.-based Tranax, which experienced a 17.5% rise in ATM sales in 2005, are developing full-service ATMs for banks and retailers that will let them move beyond the cash-dispenser market. Tranax will launch a new model in the second quarter, offering banks drive-through and walk-up versions with deposit-taking, check-scanning and other advanced banking functions, says Bill Dunn, Tranax vice president of sales.
  U.S. ATM SHIPMENTS
  Company 2005 2004 Change
  Diebold 17,180* 18,084* -5.0%
  NCR 15,860* 12,220* 29.8%
  Triton 14,782 12,204 21.1%
  Tranax 13,500 11,500 17.4%
  Wincor 3,427 3,608* -5.0%
  NexTran 3,270* 3,000 9.0%
  Tidel 3,135 2,868* 9.3%
  Greenlink 857 857 0%
  Fujitsu 125 738 -83.1%
  Lipman** N/A 915* N/A%
  Total 72,136 65,994 9.3%
  *Estimate based on financial documents and interviews.
  **Lipman is now solely a POS terminal maker.
  SOURCE: ATM&Debit News.
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