A goodwill impairment stemming from acquisitions Diebold Inc. made in Europe a decade ago helped generate a fourth-quarter loss, though the ATM maker is having some success in the U.S. with smaller banks, company officials noted during a Feb. 14 earnings call with analysts.
Overseas, regulatory issues have caused Diebold to “rethink” its distributor relationships, the North Canton, Ohio-based company said.
In 2000, Diebold spent about $160 million on two acquisitions in Europe: the ATM assets of Getronics NV in Amsterdam and Groupe Bull in Paris. Diebold meant for those purchases to help grow beyond the sales and distribution capabilities it had with InterBold, its joint venture with IBM, which left that venture in 1997.
Diebold wrote off all of its goodwill related to those acquisitions during the quarter.
“Our service operation [abroad] isn’t performing at the level we are everywhere else in the world,” Thomas Swidarski, the company’s chief executive, said during the call. “Places like Turkey and other business we won [at] very low margin.”
During the quarter, Diebold said it recorded $1.2 million in restructuring charges net of tax and $167.5 million in net nonroutine and impairment charges. It had a fourth quarter loss of $118.8 million, down from a profit of $3.2 million a year earlier. Diebold said its revenue increased 9% to about $791 million in the same period (
When it made its acquisitions in 2000, Diebold said it was the No. 3 player in Europe. It remains in that spot today, behind NCR Corp. and Wincor Nixdorf AG, according to Wedbush analyst Gil B. Luria.
Diebold is going to concentrate on direct relationships with big banks in countries where the company can compete the most, executives at the ATM company said during the call.
“It’s important to acknowledge that we certainly had our share of challenges in the recent past, which frankly has been frustrating for me,” said Swidarski. “It can be difficult to get a clear picture of the company in light of some of these complex issues. We understand the challenges we’re facing, and we’re doing the right things to get these issues behind us.”
However, observers were more interested in–and more pleased with–Diebold’s domestic business, in particular its recent successes with regional banks. At midday Monday, Diebold’s shares were selling at $35.58, up 8.5% from Friday’s $32.80 closing price.
“The key segment for Diebold is small banks in the U.S.,” Luria says. “It’s doing better than anyone expected.”
As smaller retail banks are considering upgrading their ATMs, they increasingly are interested in security, Luria says. Security is a fast-growing aspect of Diebold’s business.
Diebold also had significant software success with big retail-banking players. Last month, it said Bank of America Corp. was upgrading the majority of its ATMs with a Diebold product that could help the machines fight viruses and to more effectively do their own maintenance. The system, called OpteView Resolve, is deploying across more than 17,000 BofA machines (
Deposit automation is still one of Diebold’s strongest sells, Swidarski said.
“I remain very optimistic about growth in the North American market and our ability to capture significant portions of the deposit-automation opportunity,” he said.
Swidarski said he expects Diebold to serve more than half of the financial-services market by the end of 2011.
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