Diebold sells U.S. elections systems business to ES&S, maintains ownership of elections business in Brazil

Diebold sells U.S. elections systems business to ES&S, maintains ownership of elections business in Brazil
Tags: Bank / Credit Union, Diebold, Incorporated, North America, Public Companies
September 2, 2009 - Tracy Kitten

For years, North Canton, Ohio-based Diebold Inc. has been trying to shed its U.S. elections systems business, after controversy surrounding the systems' alleged malfunctions cropped up after the 2004 and 2008 U.S. presidential elections.

Today, Diebold announced it has finally sold its U.S. elections business, part of Allen, Texas-based Premier Election Solutions Inc., formerly known as Diebold Election Systems, on Sept. 2. The buyer, Election Systems & Software Inc., a leading company in the election systems industry, is based in Omaha, Neb.

Diebold sold the U.S. elections systems business for $5 million, plus 70 percent of outstanding accounts receivables as of Aug. 31. Diebold expects to recognize a pre-tax loss of between $45 million and $55 million as a result of the sale.

Diebold will maintain ownership of its Brazilian subsidiary, which manufactures voting machines for Brazil's national elections board, the Tribunal Superior Eleitoral. Diebold entered the elections business in Brazil in 1999.

Diebold spokesman Mike Jacobsen says the sale of the elections business will help Diebold focus on its core competencies in the United States — integrated services and financial self-service.

"In general, since Tom Swidarski came on as our CEO in early 2006, one of his priorities has been to focus our company's resources on the areas where we can best apply our expertise," Jacobsen said. "In August 2007, we said the elections business in the U.S. is not core to our expertise. Moving forward, we are continuing to focus our attention on a number of key business fundamentals. We'd been looking at a number of different potential buyers for the elections business in the strategic space and the equity space since early 2006."

Diebold made its foray in the elections space in January 2002, when it acquired Global Election Systems Inc. In early 2006, after controversy arose about the systems' reliability and former Diebold head Walden O'Dell's support of the George W. Bush campaign in 2004, Diebold made the decision to leave the U.S. elections systems business. O'Dell stepped down in December 2005.

In August 2007, Diebold realigned its U.S. elections subsidiary to operate as an independent entity and renamed the company Premier Election Solutions. Since that time, Diebold has maintained only a financial interest in Premier with no direct operational involvement.

In 2008, Premier generated $88.2 million in revenue, or 2.8 percent of Diebold's total reported revenue.