Weathering bad press

Diebold VP of global security says election-systems and stockholder woes won't affect momentum
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Wednesday, February 1, 2006

NORTH CANTON, Ohio--Board chairman and chief executive officer Walden W. O'Dell resigned his position at Diebold, Dec. 12. He was replaced by Thomas W. Swidarski as chief executive officer, who retained his position as president and duties as chief operating officer.
This comes just three months after Diebold president and chief operating officer Eric Evans was replaced by O'Dell as part of an executive restructuring that was brought on by lower than expected third quarter earnings. And it is concurrent with two recent class action lawsuits filed on behalf of stockholders who say those lower third-quarter earnings should have been expected in the first place, and who further allege insider trading on behalf of Diebold executives, including Swidarski.
"Bad press is bad press," said Jack Mallon, managing director at security analysts Mallon Associates, by way of assessing the company's status with an eye toward the integration market. "The stock took a tumble...To what degree that affects them, it's always hard to gauge, but bad press always spills over. It might be the difference between their getting a contract and somebody else."
But Diebold's vice president of global security, Dennis Moriarty, who came to the position in April of 2005, said he's been able to stay above the fray. He is not named in the insider-trading suit, and when asked about reports of poor performance by Diebold voting machines, Moriarty said, "I don't allow a lot of those things to get in my way."
He emphasized that security is Diebold's legacy business, that his division operates on its own P&L, and that if questions about Diebold's perceived struggles were to arise with a client, "I would point back to the Diebold consolidated...We had a miss, but we had a very bullish plan." Undeterred by the third quarter lowering of expectations, Moriarty pointed out that, "We're in a position of strength with acquisitions. We have not stopped acquiring."
"Their balance sheet is their balance sheet," agreed Mallon, "and they have a relatively strong balance sheet."
Included in those acquisitions are London-based integrator TASC and New York-based integrator AntarCom, which were rebranded Diebold Enterprise Security Systems in 2005. These, said Moriarty, let Diebold get into a level of integration that was previously impossible for a company many know for their ATM and bank branch servicing.
"When the financial customer says, 'We're looking at this bigger world of convergence, and we're looking to do a wholesale upgrade of our access control,' that's pretty sophisticated...Before AntarCom, we may have been awarded the branch business, but someone else might have gotten the brain stuff, the higher order stuff. But now I can combine what I've been doing for years with our higher order stuff."
But that doesn't mean Diebold's abandoning the branch business. Moriarty acknowledged the inroads being made by Red Hawk (see related story, this page): "This is a protect and defend. That's our core, that's our business." He said that AntarCom and more simply makes Diebold more able to serve that core: "If you're just talking vaults, then you relegate yourself."