Article

Vendors' Q1 numbers signal an ATM industry in flux

As profits fall, rumors fly.

April 23, 2015 by Suzanne Cluckey — Owner, Suzanne Cluckey Communications

When the going gets tough, the talk gets going.

Ahead of disappointing 2014–2015 half-year returns announced April 22 by Wincor Nixdorf AG, Reuters published an April 8 report in which "two people familiar with the matter" said the company might be shopping for a buyer.

According to Reuters:

'A P2P (public to private transaction) is one of the options, the acquisition of a peer by Wincor is another one,' one of the people said.

Now, just ahead of an NCR Corp. earnings call set for April 28, a Wall Street Journal report has said that that company is exploring strategic options as it "grapples with a lagging stock price and shareholder pressure." According to the April 22 story:

The company ... is considering alternatives including the spinoff or sale of assets or a return of cash to investors through a dividend or share buyback, people familiar with the matter said. A full sale of the company is also on the table, but some of the people cautioned that is a less-likely outcome.

"[T]he acquisition of a peer by Wincor" ... "A full sale of [NCR]" ...Put those together and you have some really sensational rumors to monger. Not only wildly speculative but also completely unsupported — even by Reuters' anonymous sources, who specifically dismissed the idea that Wincor Nixdorf might purchase NCR or OKI:

'I would suspect they would buy a company in emerging markets as that's where ATM numbers are still on the rise,' one of the sources said.

Of course, the companies themselves are not about to confirm statements by "people familiar with the matter." Contacted for verification, a Wincor spokesperson said that the Reuters report was "unsubstantiated," which sort of goes without saying.

For its part, NCR said through a spokesperson, "As a matter of policy, we do not comment on rumors or speculation," a more elaborate way to say "unsubstantiated."

Until reliable sources confirm the talk floating about on Wall Street and the Frankfurt Exchange, it will remain — like the years of persistent chatter about Apple adding NFC to the iPhone — completely speculative. Until it's not.

Wincor Nixdorf fiscal first half 

In the meantime, here's what we know for certain based on Wincor's most recent earnings report, which followed on the company's April 10 announcement that it would not meet its original guidance for the current fiscal year:

In the first half of fiscal 2014–2015 net sales fell by 2 percent to 1.21 million euros compared with 1.23 billion in the same period of the previous fiscal year. Profit was 31 million euros (45 million euros), down 31 percent on the previous year's figure for the first half.

Net sales in the banking segment rose by 1 percent to 783 million euros (778 million euros) in the first half of fiscal 2014/2015. In the second quarter, net sales were down by 4 percent year over year; EBITA of 29 million euros (51 million euros), was down 43 percent.

Net sales in the retail segment fell by 6 percent in the first six months of the fiscal year to 425 million euros (452 million euros); second quarter results were off 4 percent year over year, while EBITA rose 6 percent to 18 million euros (17 million euros).

The company linked declines primarily to a 12 percent decrease in net sales from its hardware business, which growth in software and IT services could not offset.

Software ascendant

In the first half, net sales attributable to the hardware business declined by 12 percent year on year to 504 million euros (575 million euros). In the software and services business, by contrast, net sales rose by 7 percent to 704 million euros (655 million euros). The share of total net sales generated by the hardware business fell to 42 percent (47 percent); the proportion of total net sales derived from software and services rose to 58 percent (53 percent) during the first half.

To address the negative trend in hardware, the company will embark on a restructuring program, reducing headcount by approximately 1,100 (12 percent) over the next three years, and increasing the focus on software and IT services.

"We are looking to exploit the market potential of software and IT services to an even greater extent, as well as making our hardware business more cost-effective," said Wincor Nixdorf CEO and President Eckard Heidloff.

Working from a seven-point program, Wincor will seek to accelerate transition to a software and IT services company as the hardware side is "redimensioned" to achieve sufficient margins on the basis of lower unit sales. Hardware will remain an important pillar of the business, but capacity levels will be scaled back, the company said.

Wincor will look to expand its software business principally through investment and restructuring of staffing and operations, but also will look to grow through acquisitions. The company aims to double net sales within five years, and has set a target of 600 million euros within three years. The service business also will be pushed to the next level, with emphasis on improved cost-effectiveness and significant growth in managed services and outsourcing.

Cashless payments spinoff

As a further strategic measure, the company's cashless payment business unit, which is expected to increase its net sales to 50 million euros in fiscal 2014/2015, will be carved out to become an independent operation. Positioning the unit as a startup will give it maneuvering ability within the marketplace, allowing it to become a platform for partnerships or collaborative activities or to facilitate investment opportunities.

Banking leadership changes

Jens Bohlen, a member of the board of directors and leader of the company's banking business will leave the company effective April 30, and responsibility for the global banking business will transfer to Christian Weisser, who has been appointed as senior vice president. Previously, Weisser headed the company's banking business in Europe.

Further information about earnings and the restructuring program is available from the investor relations area of the company's website. 

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.