Magazine article American Banker

Diebold Says 3Q Profit Fell 45% - but It Has a Plan

Magazine article American Banker

Diebold Says 3Q Profit Fell 45% - but It Has a Plan

Article excerpt

Diebold Inc.'s earnings sank in the third quarter, and on Wednesday the automated teller machine maker outlined steps to right itself.

Net income of $26.4 million was down 45% from a year earlier. Revenue rose 2.7%, to $622.3 million - but in July the North Canton, Ohio, company predicted $690 million.

The shortfall was not a surprise. In the past month Diebold had replaced its president and warned investors that third-quarter earnings would fall well below guidance.

Indeed, the company lowered its guidance three times this year. In January it predicted full-year earnings of $2.85 to $3, but it now expects only $1.90 to $2.

On a conference call with analysts, Thomas W. Swidarski, the newly named president and chief operating officer, said he is focusing now on four areas: customer loyalty, streamlining the production and testing of equipment; improving margins through selective price increases (particularly on some service contracts); and trimming manufacturing costs.

Mr. Swidarski succeeded Eric C. Evans this month. Mr. Evans left in September, after Diebold said it would not renew his contract.

Mr. Swidarski also said Diebold is instituting a sales-incentive program that would tie sales directly to revenue and gross-margin targets. To boost customer loyalty, Mr. Swidarski said, some marketing programs have been revamped and some larger regional banks will now be handled by the national sales team, which is better suited "to service more multifaceted customers." This will provide these banks "with the attention and focus they deserve."

Mr. Swidarski said he also wants to improve financial forecasting. Diebold plans to automate some of the process to get more accurate results, he said.

Walden W. O'Dell, Diebold's chairman and chief executive, lay much of the blame for the quarter and for the year on the poor financial forecasting. …

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