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Smaller slices of the pie?

October 11, 2005

NCR and Diebold are the undisputed leaders of ATM placements at financial institutions (FIs), but their once seemingly insurmountable lead appears to be shrinking.

Tony Hayes, vice president of Boston-based Dove Consulting Inc., said changes are on the way for both Dayton, Ohio-based NCR Corp. and its No. 1 competitor, North Canton, Ohio-based Diebold Inc.

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"I think that both companies will redouble their efforts to diversify their business," 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.

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," 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."

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. President Brian Kett 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 that 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 (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."

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