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ATM maker optimistic for 2014

Diebold talks turnaround

By Jim Mackinnon
Beacon Journal business writer

Diebold Inc.’s top executives on Tuesday said they expect the Green company’s earnings and revenue will improve in 2014, sending share prices up.

Executives discussed their turnaround strategy for the struggling $3 billion company while also reaffirming fiscal 2013 guidance at an investor conference in New York City.

The maker of automated teller machines and security systems said it expects to have adjusted earnings of $1.65 to $1.85 a share in fiscal 2014, up from an expected $1.30 to $1.40 a share this year. Next year’s revenue is expected to grow by low single digits over 2013, the company said.

Even though projected 2014 earnings fell a penny short of analyst expectations of $1.86 per share, Diebold shares rose 47 cents to $30.47 on a day when broader stock market indices were down. Diebold shares are up 2.4 percent, including dividends, since Jan. 1 and are up 7.3 percent from a year ago.

Diebold earlier this month announced the investor conference with industry analysts in New York. Among the executives participating was Andy Mattes, the company’s new chief executive officer and president.

Diebold is challenged by high costs, aging information technology systems, inaccurate forecasting, culture, operational vigor and more, the company said.

Turning around the company revolves around lowering costs, managing cash, attracting talent and improving growth, Mattes and others said. They talked about an eight-point program being put into place to create a “Diebold 2.0.”

Besides reducing costs, the years-long program also calls for improving its sales force and instilling a “can-do” attitude at all levels of the company. The intent is to build a culture of “operational excellence,” the company said.

The turnaround is now in the “crawl” stages and will advance to “walk” next year and in 2015 before going into the “run” phase in 2016 where Diebold is expected to accelerate and grow, the company said.

Diebold on Oct. 30 reported a third-quarter loss of $21.7 million, or 34 cents per share, on revenue of $705.4 million after showing a profit of $16.2 million, or 25 cents per share, on revenue of $709.9 million a year ago. Diebold had adjusted income of 56 cents per share compared to 37 cents per share a year ago.

For the first nine months of fiscal 2013, Diebold showed a loss of $140.2 million, or $2.20 a share, on revenue of $2.05 billion. For the same period in 2012, Diebold had a profit of nearly $85.5 million, or $1.34 a share, on revenue of nearly $2.2 billion.

The company, citing that it had been underperforming, fired Thomas Swidarski as chief executive officer in January and in June announced the hiring of former Hewlett-Packard executive Mattes as CEO.

The company continues to transform into more of a services and software company instead of manufacturing, according to a quarterly filing with the Securities and Exchange Commission.

Services now make up more than half of Diebold’s revenue and that share is expected to grow, Diebold said in its third-quarter SEC filing.

Diebold said it sees opportunities as banks and credit unions seek to automate a lot of routine work now done by human tellers. The company calls the ongoing changes in the banking industry “branch transformation.”

Diebold said it also continues to focus on reducing its own costs and is on track to reach targeted savings of $150 million by the end of 2015. About half of the cost savings are expected to improve operating profits, the company said in its SEC report.

Diebold said it also is working to accelerate cost-savings efforts beyond its 2015 target.

Part of the savings will be reinvested to grow the company, Diebold said in its filing. Reinvestment areas include research and development, updating information technology infrastructure, back-office operations and other areas, the company reported.

The realignment plan also is intended to globalize the Diebold service organization, unify its global organization for research and development and transform the general and administrative cost structure, the company said.

Jim Mackinnon can be reached at 330-996-3544 or jmackinnon@thebeaconjournal.com.



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