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How does the Diebold-Wincor deal look to NCR?

The proposed purchase of Wincor Nixdorf by Diebold might look good to stockholders. But is it good for the industry? Here's how another ATM-maker sees it.

October 20, 2015 by Suzanne Cluckey — Owner, Suzanne Cluckey Communications

At market close last Friday, numbers for the "Big Three" ATM manufacturers looked like this:

Wincor Nixcorf AG = 38.35 euros ($43.53)

Diebold Inc. = $33.55

NCR Corp. = $25.15

At market close Monday, the numbers looked like this:

Wincor Nixcorf AG = 45.55 euros ($51.70)

Diebold Inc. = $35.81

NCR Corp. = $25.58

And the percentage change for each company looked like this:

Wincor Nixcorf AG = up 18.77 percent

Diebold Inc. = up 6.73 percent

NCR Corp. = up 1.7 percent

This is the difference that one weekend and one M&A announcement can make. Wincor, the company being acquired in the proposed deal, managed nearly a 20 percent improvement in its stock price, with a nice boost of nearly 7 percent for its erstwhile rival Diebold. Meanwhile, yet another rumor that NCR was still up for grabs (which, as ever, the company declined to comment about) managed to eke out a less impressive bump of less than 2 percent.

All of this is to say that anything NCR has to say about a Diebold-Wincor merger could be written off as a truckload of sour grapes. But while this is an important point to acknowledge, it is not the only point in play. While some mergers turn out an unprecedented success (think Disney and Pixar), others end up an unmitigated disaster (think Sears and Kmart). And you can be sure that each deal had its share of supporters and scoffers.

Following the announcement that Wincor and Diebold were working on a deal, ATM Marketplace spoke to Brian Bailey, vice president of marketing and strategy for NCR Financial Services, about the company's initial assessment of the Diebold-Wincor deal.

Let's talk about that agreement. What do you think the implications are for the industry?

BB: I think our headline statement here is we see really limited value for our end customer — which is a financial industry that is looking for solutions beyond just a bigger ATM company.

So, when you think about this merger of two ATM companies, we think there's going to be a real complicated set of product rationalizations and decisions ahead that we think are going to be not so good for banks in terms of progress they need to make, which is not around a bigger ATM company, but really around a provider who can provide both digital and physical channel solutions for them.

Competitively for NCR, how do you see this working if we're narrowing the market from really three big competitors to two? What does that do to or for NCR?

BB:If you think about our business, we are a very well diversified global business. We have a presence in every major part of the world with a very significant share and size in each of those markets.

I think from a Diebold and Wincor perspective, clearly they've got an overlapping product line, but not necessarily an overlapping geographic presence. And so I don't see big change. We're going to continue to be a very aggressive competitor in the ATM space bringing innovation.

We do see quite a period of disruption ahead for both of those firms as they sort out product lines, as they sort out leadership and strategy decisions. It's going to be actually a pretty good time for us to continue to help our banks with the problems of today.

It seems like everyone in the industry is going through this process of strategic realignment, figuring out where the market is, where the margins are, what products are needed, what products are maybe becoming less important ... so what is your take on how this will all shake out?

BB: That's where we're just a little bit confused right now [by the Diebold offer for Wincor]. I mean, I don't think two half-solutions to a problem solve the problem. Both of these companies have struggled to become relevant in today's world of digital banking, and this has been validation of that point. Now does a bigger more efficient company in the end make a better solution provider to our customers? I can't answer that.

But we're going to just continue to do what we've been doing. We've been very focused here domestically on helping community FIs. Our acquisition of Digital Insight has really helped us to offer an omnichannel solution to the CFI market in North America. We think that's a market that does need fewer suppliers that can do more things. ... I think Diebold is clearly looking overseas for more share and more relevance. But we're going to be really close to this market and providing great solutions.

Do you see the industry as maybe moving away from a hardware-centric focus overall? And is this move by Diebold maybe to get in on the software end — because I don't think they've been as strong in software as Wincor has been.

BB: To your first question, absolutely we have been very focused on transforming ourselves into a software and services company that can help not only with ATM multivendor software ... but also we knew we needed to do more than just physical channel software, like ATMs and branch transformation. And that's driven our acquisition of Alaric in terms of transaction processing and ATM switching software; the acquisition of Transoft, which was a very viable enterprise cash management software solution; UGenius technology with the video banking software; and finally culminated with Digital Insight.

We began that transformation four or five years ago. I don't think the same thing is true for our traditional ATM competitors. Diebold obviously got started with [the acquisition of] Phoenix a few months ago. We're just really questioning how they're going to put all of these pieces together in a quick and simple manner when you've got now three or four different software applications to deal with. How do customers make a decision now on something that might not be clearly roadmapped for the next three or four years.

So, we're on the right path. Our results are good, our software and services revenue within financial services is approaching $900 million, so we're a viable software-led business today and that's where we've driven our strategy over the last two or three years.

The rest of the financial services industry will get a better idea of how that's working out during the NCR Q3 earnings call next Tuesday afternoon. Fair to say it should be, as Dudash put it, "a very spirited call." That conference will be followed by the Diebold Q3 earnings call on Thursday morning. It, too, should be a lively event.

photo istock

About Suzanne Cluckey

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Suzanne’s editorial career has spanned three decades and encompassed all B2B and B2C communications formats. Her award-winning work has appeared in trade and consumer media in the United States and internationally.

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As a global technology leader and innovative services provider, Diebold Nixdorf delivers the solutions that enable financial institutions to improve efficiencies, protect assets and better serve consumers.

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