Article
NCR, Diebold pursue other avenues in wake of dropping ATM profits
ATM manufacturing giants NCR and Diebold have towered above their competitors in the U.S. for decades. But as the ATM market becomes more competitive, the two companies are entering new markets and applying their ATM know-how in other areas.
August 16, 2005 by Tracy Kitten — Editor, AMC
Bill Nuti, NCR Corp.'s new chief, said he doesn't expect any changes. Though the former Symbol Technologies chief realigned that company from the ground up, he said his role at NCR would be much different.
 |
  |
 |
"The company and the businesses they're in are very solid," Nuti said. "We've got to stay the course on our cost-structure initiatives. And we will be looking for cost-structure efficiencies."
But Tony Hayes, vice president of Boston-based Dove Consulting Inc., a division of Hitachi Consulting, said changes are on the way regardless of whether Nuti anticipates them, for not only the Dayton, Ohio-based company but also its No. 1 competitor, North Canton, Ohio-based Diebold Inc.
"I think that both companies will redouble their efforts to diversify their business, whether that be self-service check-out or voting machines," Hayes said. "I think there will be a strong push to reduce their dependency on ATMs."
Hayes' prediction is supported by the numbers. While profit is down on the ATM side of the business for both companies, it's up in other areas, such as data warehousing and voting machines.
NCR's ATM-related operating income and revenue fell 20 percent and 2 percent, respectively, during the second quarter of 2005 from the same quarter a year ago - a decline NCR attributed in part to lower volume. In comparison, revenue from NCR's Teradata and ATM maintenance segments jumped 27 percent and 10 percent, respectively, from 2Q '04 to 2Q '05. And NCR reported a slight increase in its retail store-automation segment, which includes self check-out technologies.
Diebold's financials reflect similar changes.
Despite a 58-percent increase in Opteva orders and an 11.7 percent increase in ATM-related revenue in 2Q '05 from 2Q '04, Diebold's overall net income dropped 23.6 percent, forcing the company to close manufacturing facilities and cut 300 jobs in the United States and Western Europe.
Dave Bucci, senior vice president for Diebold's Customer Solutions division in the United States, said Diebold's strong 2Q in '04, which resulted from Triple DES upgrades in North America, set the bar high for profit this year. "We just had a very tough, competitive quarter when compared to last year," he said. "What what we did last year was driven by a lot of upgrades ... but our upgrades this year have been down."
While net income from the ATM side is taking a hit, revenue from Diebold's security solutions and election systems businesses grew 25 percent and 17 percent, respectively.
Those growth products and services, Hayes said, will play crucial roles in helping both companies reach their long-term goals.
"Diebold and NCR will remain ATM companies - they won't evolve into being voting machine companies or self check-out companies," he said. "But the value creation in those companies will shift from making ATM hardware to making ATM software. We will see much less emphasis on manufacturing and much more on custom application design."
Competition at the door
Hayes said NCR's and Diebold's interest in other services and markets - a response to declining ATM profits - is in part driven by new competition.
Both companies are finding it harder to compete with manufacturers such as Paderborn, Germany-based Wincor Nixdorf International and Long Beach, Miss.-based Triton Systems, which are producing less expensive ATMs.
"They are forced to cut their prices to remain competitive, and that's just when the two are competing with each other. Now, for really the first time, they are seeing serious competition from Wincor and Triton," he said.
"Wincor won a nice contract with the U.S. Postal Service and I think their profile within U.S. (financial) institutions is picking up," Hayes added. "We also see that Wincor's pricing is significantly undercutting Diebold's and NCR's pricing (in Europe), and that could take place here in the U.S., too."
Triton also is nipping at the heels of the giants. Brian Kett, president, said that while Triton continues to grow on the ISO side of the business, it's also "moving to the FI market. We are putting out a lot of products that meet the needs of our FI customers."
|
Like ATM revenue at NCR and Diebold, however, Kett said, Triton's remained flat for the first half of the year. And like NCR and Diebold, he's looking forward to the wave of Check 21-related business over the next couple of years - but maybe more so.
"I think we will see many of them (FIs) replacing their ATMs all together with Triton ATMs, because Triton ATMs are cheaper to upgrade than some of the original manufacturers they worked with. From that we will see positive growth."
"Triton is in an interesting position," Hayes said. "Triton has been diversifying to market to the credit unions and the community banks - and their price point is half the incumbents' price point. But the big unknown for Triton is whether they have the servicing capabilities to support the machines."
ATMs still No. 1, NCR and Diebold say
Competition and an interest in other products or services, however, have not convinced everyone that change is on the way for NCR and Diebold.
"NCR has been focusing on the retail side of the business for some time, and if you go back, Diebold for some time has been focusing on security. I don't see that as a trade off," said Kartik Mehta, a financial analyst with Cleveland-based FTN Midwest Research.
Both NCR and Diebold admit suffering adverse effects from slower-than-expected ATM upgrades and replacements associated with Check 21 during the first half of the year. But both say they expect to recoup in 2006-07, when Check 21 starts making waves. In the interim, the global market will balance their ATM profits.
Bob Tramontano, vice president of global product marketing and engineering for NCR, said the ATM market in the U.S. is healthy and will continue to grow. Like Bucci at Diebold, Tramontano said NCR was "more reserved in the growth that we pulled in the Americas this year because our growth wasn't as fast as it had been when compared to other quarters," because of upgrades and replacements associated with Triple DES.
"When one market is up in sales and revenue, another market is probably down," said Andy Orent, vice president of NCR's Financial Solutions division for the Americas. "But it all balances out."
"We're in 120 countries, and that's not coincidental," he added. "We've grown strategically and placed technology in markets where it made sense."
Global balance or not, the companies are diversifying their revenue base.
NCR is approaching "self-service from an ATM perspective and trying to move into other areas like airline kiosks," Tramontano said. "We are extending into the quick-service market, too."
In October, NCR acquired Lake Mary, Fla.-based Kinetics Inc., a self-service solutions provider to the airline, travel, entertainment and quick-serve restaurant markets.
-- Tony Hayes, |
They are forced to cut their prices to remain competitive, and that's just when the two are competing with each other. Now, for really the first time, they are seeing serious competition from Wincor and Triton.
Bucci said that Diebold, too, is strengthening its revenue in other areas.
In addition to expected double-digit growth in its security business, Bucci said, "We are interested in outsourcing, and we are looking at our integrated management services. I think there is opportunity for us to run financial institutions' ATM networks here in the U.S. We are already doing some of that up in Canada and in Brazil."
Diebold's acquisition in May of London-based TASC Security, which provides electronic security systems and integration, will help.
"We're just trying to provide global security for the retail and financial customer," Bucci said.
What our readers how to say about this article ...
Read also: Diebold adjusts 2Q earnings report
Included In This Story
Triton Systems
Triton FI based products • NO Windows 10™ Upgrade • Secured locked down system that is virus/malware resistant • Flexible configurations - Drive-up and Walk-up • Triton's high security standards • NFC, anti-skim card reader, IP camera and level 1 vaults are all options • Triton Connect monitoring • Lower cost
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.
Related Media
Subscribe
Get the latest news and resources from ATM Marketplace.
Recent Posts
