KeyBanc Downgrades Diebold on Concerns With Voting Machines Business

NEW YORK (AP) -- A KeyBanc Capital Markets analyst cut his rating on Diebold Inc. Monday, citing possible legislative concerns in the company's voting machines business.

Matt J. Summerville, in a client note, cut the stock to "Hold" from "Buy," noting likely issues in the company's election systems business due to potential legislation.

Potential amendments to The Help America Vote Act could cause problems for makers of electronic voting machines, especially those that feature touch-screen terminals, like Diebold, the analyst wrote.

Some issues include suggested amendments that would require makers of electronic voting machines to make software codes available to the government, and security concerns raised by some states. Some proposed changes to the voting law could make it harder for touch-screen terminals to become popular, the analyst wrote.

"Near-term, certain states such as New York appear increasingly unlikely to purchase new voting equipment (that would include touch-screen or optical scan systems), in 2007 or possibly even 2008," the analyst wrote.

Summerville said investors could increasingly sour on the stock if Diebold does not try to sell the unit.