Diebold is shopping for a new chief executive officer.
The Green maker of ATMs and security systems announced Thursday that Thomas Swidarski, CEO since late 2005, was asked to resign after a new board chairman said the company has not executed as expected and has underperformed. The company said it expects to report a loss for its fourth quarter and miss earnings expectations.
While a news release on Thursday said Swidarski “is stepping down,” a company filing with the Securities and Exchange Commission said Swidarski “stepped down from his positions as the president and chief executive officer of the company and resigned from the company’s board of directors, effective January 19, 2013.”
Swidarski was asked to leave, Diebold spokesman Mike Jacobsen said.
Henry D.G. Wallace, a former Ford Motor Co. executive who was just named Diebold board chairman on Monday, was named executive chairman. He will oversee Diebold until a new CEO is named, the company said. Wallace has been a Diebold board member since 2003.
George S. Mayes Jr., 54, executive vice president for global operations and a West Point graduate, was promoted to the newly created position of chief operating officer and will be responsible for daily operations. Mayes, who has global manufacturing experience, will report directly to Wallace.
Chief operating officers often are next in line to CEO; one industry analyst said he thinks the Diebold board will look outside the company for a new chief executive. The Diebold board has not set a hiring deadline.
The board likely was pressured by shareholders to make a leadership change, said Gil Luria, analyst with Wedbush Securities in Los Angeles.
One sign of pressure came from Diebold’s second largest shareholder, GAMCO Investors Inc., a $30 billion investment and mutual fund company with about 7.8 percent of Diebold’s shares.
GAMCO indicated earlier this month in a filing with the SEC that it was looking into nominating its own candidate to the Diebold board; if so, that is called a proxy contest and can threaten a change in control of a company. GAMCO, in Rye, N.Y., was founded by investor Mario Gabelli, whose investing philosophy includes buying large positions in companies that it considers takeover targets.
Loss in fourth quarter
Diebold said Thursday it lost 12 cents a share for the fourth quarter, based on preliminary results. The company said it expects to show a profit for the full year. Diebold is scheduled to release full fourth-quarter and fiscal 2012 results on Feb. 12.
Shares of Diebold finished down $2.75, or 8.4 percent in Thursday trading. Shares are down 2.3 percent, including dividends, since Jan. 1 and are down 2.9 percent from a year ago.
Seeking speedier change
“As we look to the future, the board feels Diebold’s strategies are sound given the company’s progress on several fronts, including integrated services and the growth potential of electronic security. Our anticipated revenue growth for the year is evidence that our markets remain sound,” Wallace said in a statement. “However, the company’s execution of its strategies has not been what we want or expect and we have underperformed against the opportunities in the marketplace. This reflects the need for deeper, faster operational transformation. Our search for a new chief executive will focus on attracting a candidate with a proven track record for successfully executing growth strategies in a global software and services environment.”
Luria, the industry analyst who follows Diebold, said he was disappointed by the company’s preliminary earnings. While he said he was not completely surprised that the board removed Swidarski, he did not expect the company to take that kind of action immediately.
“I thought Mr. Swidarski did a great job as CEO,” Luria said, adding that Swidarski “did well with the cards he was dealt. … I think very highly of him.”
But Diebold’s stock price and earnings have been stagnant, he said. In addition, small and mid-size banks in particular in the United States largely stopped buying ATMs in the aftermath of the financial crisis, he said. ATM sales briefly rose in 2012 but that proved a brief phenomenon, he said.
Diebold’s preliminary earnings announcement Thursday was “disappointing,” Luria said.
Difficult decision on CEO
The decision to ask Swidarski to leave was a tough one for the Diebold board, Jacobsen said.
“Tom was very well respected internally and by the board,” he said.
Swidarski has been in Diebold’s headquarters all this week saying goodbye to the people he worked with, he said. The company did not make Swidarski available for comment.
Swidarski, a 17-year Diebold executive, was a rising star at the company when he was named CEO in December 2005, succeeding Wally O’Dell. O’Dell resigned following poor financial results and political controversy involving the company’s new venture into electronic voting machines. The board at that time said O’Dell resigned for personal reasons. Swidarski was put in charge of restructuring the company.
Swidarski often talked about the need to transform Diebold from an emphasis on manufacturing to financial industry service and software.
Swidarski had the right approach in transforming Diebold, Luria said. “The board wants to get there faster.”
Swidarski’s leaving also follows Diebold’s decision to cancel plans last October to build a new $100 million corporate headquarters in Green. The corporate headquarters project had been announced with great fanfare and involved a $56 million incentive package from the state of Ohio.
Swidarski in October said, “It became clear that investing more than $100 million in a headquarters facility is not economically feasible given the other priorities for the business at this time.”
Wallace said Mayes’ “near-term focus will be to look at all aspects of the organization and identify areas that will help us accelerate the speed with which we reduce our cost structure and capitalize on changes in the marketplace. His track record of delivering sound, fiscally responsible results in his career makes him ideally suited to lead our operations during this time of transition. This is a challenging opportunity, yet I am confident in our ability to begin the process of putting this great company back on a more positive trajectory. We will have much more to report on our progress and immediate plans for 2013 during our fourth quarter and year-end conference call with investors in February.”
Mayes joined Diebold in 2005 as vice president, global manufacturing, and was appointed executive vice president of global operations in April 2008. He previously spent 15 years at General Motors in manufacturing, quality and engineering. He also was chief operating officer and a member of the board of directors at Tinnerman Palnut Engineered Products LLC. He has managed plants in Canada, Mexico, France, Hungary, Brazil, China, Poland and Italy as well as in the United States.
Jim Mackinnon can be reached at 330-996-3544 or firstname.lastname@example.org