Diebold Restructuring Its Voting Machine Division

Article excerpt

After failing to find a buyer for its election systems division, Diebold Inc. said Thursday that it is restructuring and renaming the unit to make it more independent.

The automated teller machine company also said that several orders the unit had been expected would likely be pushed out, and it slashed its guidance.

Mike Jacobsen, a spokesman, said the North Canton, Ohio, company shopped Diebold Election Systems for 12 to 18 months. Buyers were put off by "the rapidly evolving political uncertainties" surrounding electronic voting machines and the upgrades of election jurisdictions happening around the country, he said.

Thomas W. Swidarski, Diebold's president and chief executive, said in a press release, "Given our concerted evaluation of all strategic alternatives available to us at this time, this is the most appropriate course of action for Diebold and all its stakeholders."

Mr. Swidarski was not available for an interview Thursday, Mr. Jacobsen said.

The voting machines have long been a lightning rod for criticism, as activists questioned their reliability and security. These concerns were exacerbated by a 2003 fund-raising letter to Republican supporters in which Walden O'Dell, Diebold's chairman, president, and CEO at the time, wrote that he was committed "to helping Ohio deliver its electoral votes to" President Bush, fueling fears that Diebold's machines could be rigged. Mr. O'Dell left the company in 2005.

The unit is getting a new name, Premier Election Solutions, and its own board. It will remain a Diebold subsidiary, but Mr. Jacobsen said the parent company would not "rule out the possibility of divesting a portion or all of its ownership in the newly realigned company."

Though the election unit will have more autonomy, Mr. Jacobsen said "public scrutiny will always be an issue and that needs to be managed. And a name change and getting more independence won't necessarily alleviate us of that obligation."

Gil Luria, a analyst with Wedbush Morgan Securities, said the election systems division has been "a distraction and generator of bad publicity and not strategic" to Diebold.

"This business represents 5% of revenue and 100% of bad public relations," he said.

By changing the name, Mr. Luria said, Diebold is attempting to put the unit "more at arm's length" and is opening the door for a possible spinoff, though he said he did not think it would fetch much in a sale. …