Struggling Diebold Inc. started 2013 with a marquee job cut — that of now-former Chief Executive Officer Thomas Swidarski.
The Green maker of automated teller machines and security systems on Tuesday said it is eliminating 700 more positions, primarily in North America, as part of a major reorganization. The cuts work out to about 10 percent of Diebold’s roughly 7,000 employees in the U.S and include 130 jobs that went along with the sale last month of manufacturing plants in Virginia and North Carolina.
About 100 jobs are being eliminated in the Akron-Canton area, where Diebold has 1,900 employees at its headquarters and nearby facilities. Job cuts includes some senior executives and managers, with some taking early retirement.
Job levels in the region are expected to remain at about 1,900, a spokesman said.
The job eliminations are part of a broad “transformative” plan to return Diebold to profitability and growth, executives said as the company reported it lost money in the first quarter this year. The cost-cutting goal is to save between $100 million to $150 million by the end of 2014. Diebold had nearly $3 billion in revenue last year.
Diebold’s executive chairman said 2013 will be a “year of rebuilding” for the company.
The hundreds of people whose jobs are being eliminated were notified in January; most of the cuts have taken place with the rest to be completed by the end of 2014, Diebold said in a regulatory filing.
Diebold continues to hire for what are called “mission critical” areas such as electronic security and software development where the company intends to grow, spokesman Michael Jacobsen said. For instance, Diebold recently opened new office space in the area where 60 employees in the electronic security group now work, he said.
Diebold took a charge of $10 million in the first quarter for the work-force reductions and estimates it will have total charges of $25 million to $40 million for severance benefits and related expenses once the process is finished.
For the first quarter, Diebold lost $13.4 million, or 21 cents a share, on revenue of $633.5 million. A year ago the company had a profit of $45.2 million, or 71 cents per share, on revenue of $698.5 million.
On an adjusted basis, Diebold said it lost 4 cents per share for the quarter compared with earnings of 74 cents a share for the first quarter a year ago.
“Over the past several years we have seen decent revenue growth, however that has not translated into improved profitability,” Bradley Richardson, chief financial officer, told industry analysts. It is critical that the company improve its cost structure so that it can speed up investments in growth areas, he said.
Richardson and other executives reaffirmed the earnings outlook for the year of relatively flat revenue and earnings flat to down moderately compared with 2012.
Diebold’s first-quarter earnings and revenue fell below analyst expectations of an adjusted profit of 17 cents per share and revenue of $658.8 million.
Shares of Diebold closed down 86 cents Tuesday to $29.29; shares were down as low as $28.26 in early trading. Shares are down 3.4 percent, including dividends, since Jan. 1 and are down 23 percent from a year ago.
“The first-quarter loss we reported this morning was extremely disappointing to all of us at Diebold, but it was not unexpected. In fact, it was in line with our internal forecast,” Henry D.G. Wallace, executive chairman, said in opening statements to industry analysts.
“In late 2012, as we developed our forecasts for 2013, we could see a significant shift taking place in our North America business. This put significant downward pressure on our profitability,” Wallace said. The trends pointed to weak first and second quarters this year, he said.
“Faced with this situation, we moved quickly in January to develop a plan to change the trajectory of the company,” Wallace said. “We expect 2013 to be a year of rebuilding, taking the necessary action and making the appropriate investments to improve our financial condition and profitability of the company and to position the company for future profitable growth.”
The changes include promoting George Mayes Jr. to chief operating officer following the resignation of Swidarski, Wallace noted.
Diebold continues to look for a new chief executive officer, he said.
“There is no set time frame on filling the position as we remain focused on finding the right person for the job,” Wallace said.
In response to an analyst asking if the choice of the new CEO will reflect a corporate strategy that focuses more on software, Wallace said “that’s one of the areas that we think is very important and that certainly is a big factor in our minds.”
Mayes told analysts that the company is taking critical steps to “shape the long-term trajectory of the company.”
The three areas Diebold executives have identified to make changes are organizational realignment, structural cost reductions and investment in growth, he said.
“As we rebuild our company, we recognize the emerging opportunities in the markets we serve such as branch transformation, integrated services and electronic security and we continue to invest in those areas,” Mayes said.
Diebold in late January announced Swidarski, who became CEO in 2005 with a mandate to transform the company away from manufacturing, stepped down after Diebold continued to report stagnant earnings, with its stock price showing little life.
Jim Mackinnon can be reached at 330-996-3544 or firstname.lastname@example.org.