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Triton Systems of Delaware Inc. is making what it considers are the necessary moves needed for the ATM maker to regain its direction and to cut expenses in the wake of a merger deal that fell through last month for the financially troubled company.
"We are regaining our focus," Daryl Cornell, Triton general manager and chief financial officer, tells ATM&Debit News. "We are a leader in the off-premise ATM industry. We have shipped more than 200,000 ATMs worldwide, but we got away from our core business. We are dropping anything that is not core to our operations."
A failed agreement between Dover Corp., Triton's New York-based parent, and Nautilus Hyosung Inc. has prompted management of the Long Beach, Miss.-based ATM company to reevaluate its operations.
Nautilus Hyosung, whose headquarters in Seoul, South Korea, in July had agreed to purchase Triton from Dover in an all-stock transaction. The companies never disclosed the value of the proposed deal.
The sale was scheduled to close Oct. 1, pending U.S. Department of Justice approval. The agency, however, did not like what it saw.
"The antitrust division conducted a thorough review. If the transaction had gone through, small retail establishments would have paid higher prices for retail ATMs. Competition in the retail market will be maintained," a Justice Department spokesperson tells ATM&Debit News. If the department had approved the agreement, the combined companies would have controlled 65% to 70% of the $150 million to $175 million off-premise ATM market.
As a result of the Justice Department's intractable position, Dover and Nautilus Hyosung announced May 22 that they mutually agreed to end their deal.
Last Friday, Triton disclosed a series of steps designed to improve the company's performance. The steps include laying off 58 of its 306 employees. "We needed to 'right-size' the company," Cornell says.
Triton also is closing one of its two facilities in Long Beach, and it will expand its manufacturing plant to house executives, engineers and administrators, Cornell says, noting the task should be completed in eight to 10 weeks.
"We plan a pretty sizable six-figure investment," he says. "We don't know how much money we will save by moving to one facility, but we will save on utilities and maintenance."
Triton also operates a facility in Memphis, Tenn., that provides training, supplies parts and is a customer-service center.
Months before the deal collapsed, Triton had sold Calypso, its Canadian processor that operated in the United Kingdom and Australia. Triton also has put up for sale its UK-based independent sales organization.
"We will focus on our core operations of manufacturing ATMs, developing software and providing technical ATM support," says Cornell, noting that by paying attention to these areas the company is playing to its strengths.
As an example, Triton could assist companies that want to build kiosks but do not have the technical support in the U.S. to expand their products.
Triton also is holding preliminary talks with a kiosk manufacturer, Cornell says, without disclosing details.
In addition, the ATM maker plans to re-connect with some of its customers that moved their business to Nautilus Hyosung believing the proposed merger would close.
"We lost some customers to Nautilus Hyosung, but we believe that they will come back because we are one of the sole source suppliers of ATMs," Cornell says. The other company is Tranax Technologies Inc., he says.
However, Nautilus Hyosung America Inc., which controls the U.S. off-premise ATM market, might emerge an even stronger company than it was before the proposed purchase agreement.
"They are an 800-pound guerrilla," says Leon Majors, president of the Payments Systems Practice for Phoenix Marketing International in Salisbury, Md. "They control more than 60% of the of the market for retail off-premise ATM sales."
Competitors accuse Nautilus Hyosung America, which is based in Coppell, Texas, of taking market share away from them by severely cutting prices to try to drive them out of business. Triton is one of the companies to complain.
"Hyosung has been a particularly strong competitor because it has been offering ATMs at lower prices and driving prices down in an apparent attempt to force other ATM manufacturers, such as Triton and Tranax, out of business," Triton alleges in a lawsuit it filed against some of its former executives (ADN, 4/10/08). Competitors had to cut ATM prices to 30% to 40% to maintain market share (ADN, 1/10/08).
Triton executives repeatedly refused to discuss Nautilus Hyosung after the failed deal, but the dislike they harbor for their competitor is palpable.
James Phillips, Triton director of North American sales, says he has been spending a lot of time on the telephone explaining to customers why the agreement collapsed.
If some of Triton's large customers return, the company may be okay, says Majors, adding that Nautilus Hysoung still would control much of the market, selling tens of thousands of retail ATMs annually.
Triton, however, will face stiff competition from Hayward, Calif.-based Tranax in what Majors calls the "battle for the small orders."
Independent sales organizations purchase 35,000 ATMs annually and deploy them in quick-service restaurants, movie theaters, gambling casinos and other retail locations.
The Justice Department's long, drawn-out review hurt Triton, says Phil Suitt, president of ATM Ventures in Spring, Texas. "It is really unfortunate that it took so damn long for nothing to happen," says Suitt, who is a master distributor for Triton and Nautilus Hyosung. "It is really unfair to Triton because its business has been in limbo for several months."
Phillips agrees. "We had our hands tied," he laments, noting the rumor mill was working overtime that Triton would shut down if it did not complete its deal with Nautilus Hyosung. "There has been a cloud over us for the past 10 months," he laments.
Phillips, however, prefers to look to the future. "We are now free to run our business," he says. "We are moving forward as a standalone company, and we are excited to be moving forward. We are rolling out a new product later this year."
Triton might be in difficult financial shape. In the fourth quarter of 2007, Dover said the company would report a $3 million to $5 million loss (ADN, 1/10/08). More recent financial figures are not available. Cornell and Phillips say Dover, a $7 billion industrial company, will continue its financial support of Triton. ATM
