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Swidarski expected to focus on customer loyalty, profitability

Diebold's new CEO is expected to pull from his years of experience in financial institutions and Diebold's financial self-service unit to build the company's reputation and profitability.

December 18, 2005

The departure of Diebold Inc.'s chief executive officer, Walden W. O'Dell, didn't come as a surprise to consultant Sam Ditzion, the president and CEO of Boston-based ATM-industry advisory firm Tremont Capital Group. "I was shocked that this didn't happen a long time ago," Ditzion said.

Poor profitability and continued negative publicity surrounding the company's voting-machine business haunted O'Dell in recent quarters.

"Wally O'Dell made several positive contributions to Diebold, but on his watch his company had a series of recurring operational and profitability issues, and he ultimately lost the confidence of investors," Ditzion said.

Tom Swidarski was named CEO of Diebold Dec. 12.

To some on Wall Street, however, O'Dell's move was probably a little shocking, albeit positive, Ditzion said. "The feeling that I got was that Wall Street didn't trust him."

And that distrust was reflected on the market, where Diebold's stock has continued to drop since August, from $50 per share to $37. In October, the company announced that its third-quarter profits were 45 percent lower than profits from the same period last year, with earnings per share at 37 cents, down from 66 cents a year earlier. (Read also, Diebold's profit falls 45% in 3Q.)

After the announcement of O'Dell's resignation, which Diebold attributed to "personal reasons," stocks began to show improvement. (Read also,BREAKING: O'Dell leaves Diebold, Swidarski named new CEO.)On Dec. 13, New York-based Jeffries & Company Inc. upgraded Diebold's stock to a "buy." And during afternoon trading Dec. 15, Diebold was selling for $39 a share.

Diebold's stock appears to be on an upswing since O'Dell's announcement Monday. But what of his replacement, Thomas Swidarski, whose name only recently started to catch the attention of the press?

Swidarski flew under the radar until October, when he was named president and chief operating officer, after serving as the vice president of Diebold's financial self-service unit. (Read also, Swidarski, Krakora named to key positions at Diebold.)

Just a month earlier, Diebold's former president and COO, Eric Evans, resigned, and O'Dell announced that he would be assuming the president's role and more direct control of global operations. Now things are shaking up again.

But analysts appear to be hopeful about Swidarski. With a strong financial background and experience in the company's self-service unit - which accounts for about 69 percent of Diebold's overall revenue - Swidarski shows promise. (Read also, NCR, Diebold pursue other avenues in wake of dropping ATM profits.)

"Tom Swidarski has an excellent reputation and could be the fresh start that Diebold needs, but he has a lot to prove and faces many challenges ahead," Tremont's Ditzion said, adding that Swidarski has never run a company "like" Diebold before. "The launch, execution, and PR surrounding Diebold's election systems business, which should have been a home run following the 2000 election re-count, was at times disastrous, but Swidarski has recently begun to turn it around."

Brian Goerke of Pittsburgh-based PNC Bank, who worked with closely with Swidarski during his years with PNC, said Swidarski is a "results-oriented" leader, an attribute that likely caught attention of Diebold's board.

During his approximately 10 years with PNC, Swidarski moved through management and was heading PNC's corporate marketing department when he joined Diebold nine years ago, Goerke said. "Tom's strength here at PNC was his ability to take on a challenge and see it through to a results-oriented conclusion. He's also a people-oriented person - a person people enjoy dealing with and being around, and that's always helpful in a position like the one he's in."

Swidarski's style is already starting to show results at Diebold, said Mike Jacobsen, Diebold's director of corporate communications. "What stood out about Tom, I think, is that the board of directors has been impressed with some of the initiatives he's launched as COO. Being here over nine years, along with his experience in the financial industry, was key."

"Since Tom took over a couple of months ago as president," Jacobsen added, "he's done a lot of things, like host some webcasts within the company (to keep communications between departments open). … Tom is really trying to stress in the company that we need to take time and make it a priority to communicate."

And that open communication, Jacobsen said, has already made a difference.

Looking ahead

In addition to better communication, Swidarski has identified four additional priorities for 2006. Those priorities include increased customer loyalty, lowered quality-assurance costs, a strengthened supply chain and improved profitability.

"The way he explains it, profit margins are all about eliminating waste," Jacobsen said. "From a revenue perspective, we're still doing very well. It's the margins on those revenues that have been a problem for us."

John Lauer, who's been on Diebold's board of directors since 1992, was appointed non-executive chairman, to fill the void left by O'Dell. In that capacity, Jacobsen said, "Mr. Lauer's role will be as a mentor (to Swidarski)."

No plans have been made to fill the vacant COO position, Jacobsen added.

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