Article

Diebold reports drop in first–quarter net income as operating losses grow in Europe

Diebold's stock had one of the largest percentage decreases among companies traded on the Big Board.

April 26, 2011

Diebold Inc.'s stock price plunged yesterday after the ATM manufacturer reported a first-quarter drop in net income tied to the company's ongoing restructuring in the Europe/Middle East/Africa (EMEA) region, where it reported a higher operating loss.

Diebold recorded a first-quarter net income of $2.5 million or 4 cents per share compared with net income of $24.9 million or 37 cents per share for the same three-month period in 2010. Revenue for the first quarter ended March 31, 2011, was $614.2 million, down 0.8 percent compared with $618.9 million in 2010's first quarter.

Thomas W. Swidarski, Diebold president and CEO, reported a $10 million operating loss for EMEA during the first quarter, which was higher than the range of $5 million to $8 million operating loss the company recorded in 2010's first quarter.  Revenues in EMEA also dropped. He attributed the operating loss to a decline in gross-product margins, a drop in service-gross margins and a drop in operating income.

As a result, Diebold reported a $11.8 million first-quarter restructuring charge attributed primarily to EMEA. The region accounted for $5.6 million of the restructuring charge. Swidarski said the company will put more of its resources into Spain, the United Kingdom, France and Italy where it competes effectively. Diebold will face strong competition in Western Europe from rival Wincor Nixdorf AG, which is based in Paderborn, Germany.

"We are putting more focus on these countries to build density to drive our business model," said Swidarski, explaining that the company will focus on financial institutions in EMEA that also have operations in other parts of the world. For EMEA, Diebold reported first-quarter revenue of $71.4 million, down 5 percent compared with $74.8 million for the same three-month period in 2010.

Gil B. Luria, an analyst, called EMEA's results a big disappointment.

"The loss in EMEA was the biggest disappointment in Diebold's report. Although investors were aware of Diebold's intention to exit some countries in EMEA and restructure operations, the expectation was for increased profitability, not a decrease.  Looks like the loss was a result of a disruption in operations due to the restructuring," said Luria, who is senior vice president of Equity Research, Computer Services and Financial Technology at Webush Securities in Los Angeles.

Diebold reported a drop in revenues during the first quarter in Asia Pacific. First-quarter 2011 revenues were $83.8 million, down 15 percent compared with $98.4 million for the same three months last year.

In Latin America and North America, however, there was better news. Diebold North America reported a 3 percent increase in revenue to $305.9 million compared to $296.2 million in 2010's first quarter. He attributed the growth in North America to more regional banks purchasing intelligent-deposit ATMs, which was a shift away from national banks buying the product.

The company will hold 35 to 40 seminars this year to promote its intelligent deposit ATMs to banks, Swidarski said. "Bank officials attend two-to-three conferences before they make decision to buy," he added. "This is the second-consecutive quarter we have reported a 30 percent increase in orders."

Diebold Latin America, which includes Brazil, reported first-quarter revenues of $152.8 million, up 2 percent compared with $149.5 million in 2010's first quarter. 

First-quarter 2011 revenue for Financial Self-Service products, which includes Diebold North America, Latin America, EMEA and Asia Pacific, was $198.6 million, down 2 percent compared with $203.7 million in 2010's first quarter.

Revenue for Financial Self-Service Services in 2011's first quarter was $264.4 million, down 1 percent compared with $267.8 million in 2010's first quarter. Total Financial Self-Service revenue for 2011's first quarter reached $463.0 million, down 2 percent compared with $471.5 million in 2010's first quarter.

Swidarski called the first-quarter results "disappointing" and investors agreed. The New York Stock Exchange reported yesterday that Diebold's stock had one of the largest percentage decreases among companies traded on the Big Board, dropping 6.1 percent to $34.69 per share. In early afternoon trading, the company's stock price fell $2.43 per share to $34.51.

A spokesperson for Diebold said the company does not respond to short-term stock fluctuations.

Included In This Story

---

Diebold Nixdorf

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.

Request Info

Learn More