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Deteriorating conditions in several key markets led Diebold Inc. to report a 76.1% plunge in first-quarter net income for the three-month period ended March 31.
Diebold Tuesday recorded net income of $3.7 million, down 76.1% from $15.5 million for the same period last year. Revenues reached $663.1 million, down 4.2% compared with $691.9 million.
Thomas Swidarski, the ATM manufacturer's president and CEO, blames the drop in revenue and net income on worsening market conditions in the U.S., Russia, Eastern Europe and Australia.
As a result, Swidarski told analysts during a conference call that the North Canton, Ohio-based company would reduce its staff by 300 full-time positions.
"This market weakness in orders, which occurred in some of our most profitable business sectors, has forced us to reduce our revenue and earnings expectations for the full year 2009," Swidarski said.
Diebold's venture into Russia and Eastern Europe has collapsed for the time being, Swidarski said.
"We have taken Russia off the table. We have few orders there, but we expect zero from Russia for the rest of the year," he says. The company also faces significant challenges selling ATMs in Australia and to regional banks in the U.S.
"The deployment of capital by regional banks remains conservative. They are reluctant to make any capital investments, Swidarski says.
"Regional U.S. banks are paralyzed by fear," says Gil Luria, an analyst with Wedbush Morgan Securities in Los Angeles. "Management broke down the weakness in regional-bank spending to three factors-conservatism, [fewer] branch openings and fear of pending FDIC assessments."
The Federal Deposit Insurance Corp., an independent government agency that insures bank deposits, may assess each bank's deposits up to 20 basis points to replenish its insurance fund. "The spate of bank failures has depleted the fund," Luria says. "Concern about the FDIC assessment is one reason why regional banks are not buying ATMs."
Another concern in the decline in applications for new bank branches.
Applications for new U.S. bank branches have dramatically dropped this year compared with a few years ago, Swidarski says.
Diebold, however, reported good news out of Latin America, where ATM sales continue to grow. China, Thailand and Indonesia also had strong demand for ATM orders, Swidarski says.
Diebold's Financial Self-Service Products business, which includes ATMs, reported sales of $239.9 million, up 4.7% compared with $229.1 million for the same three-month period last year. ATM
