http://www.cleveland.com/business/plaindealer/index.ssf?/base/business/1127554827276460.xml&coll=2&thispage=1
Sept. 25, 2005
Alison Grant
Plain Dealer Reporter
Diebold Inc. lost almost a fifth of its share value last
week after chopping its profit forecast and changing top management for the
second time in recent months.
Chief Operating Officer and President Eric Evans left the
company. Chairman and Chief Executive Walden O'Dell said he would add the
responsibilities of COO and president.
The shake-up and weaker forecast caught some analysts off
guard and left corporate-governance experts questioning whether O'Dell would be
wearing too many hats.
The Summit County maker of automated teller machines and
electronic voting equipment said Wednesday that its third-quarter revenue from
ATMs would be $50 million lower than earlier forecast.
Voting machine sales will be $10 million less in the third
quarter because of delayed deliveries to the hurricane-swept Gulf Coast,
Diebold said.
Yvonne Varano, with Jefferies & Co., said O'Dell left
unanswered questions after his conference call Wednesday with analysts who
cover the company.
Varano said she wanted more clarity about why regional banks
are delaying orders for ATMs - O'Dell said the delay was worst in the Southeast
- and a better explanation of what O'Dell meant when he blamed some of
Diebold's lowered forecast on "operating inefficiencies."
Varano downgraded Diebold to a "hold" from a
"buy."
O'Dell told analysts that the company would have more
explanation for its profit shortfall when it releases third-quarter results
Oct. 26.
Kartik Mehta, with FTN Midwest Research, an equity research
firm in Cleveland, said ATM demand is probably off because community banks have
been spending all year to comply with Sarbanes-Oxley, the law to reform
financial reporting, and other regulations.
At Matrix USA in New York City, Ivan Feinseth said he put a
sell recommendation on Diebold last November.
Feinseth said penetrating more of the competitive North
American ATM market requires getting banks interested in sophisticated ATMs
that are far more than cash dispensers.
"But they cost more, so you have to show the bank why
it's worth it to them," Feinseth said, "and Diebold hasn't been doing
that."
The company rolled out its Opteva line in the spring of
2003, but getting customers to switch to the new model has proved harder than
the company expected.
One person, four jobs
O'Dell's decision to take on the job of chief operating
officer struck corporate watchdogs as a bad move. The COO oversees day-to-day
management of the company, while the chief executive is responsible for
big-picture strategy.
After executive scandals at Enron and Co., some companies
decided to go the other direction, separating even the duties of chairman and
chief executive.
Carly Fiorina, former CEO of Hewlett-Packard Co., never
hired a COO after Hewlett-Packard's left, maintaining that "you can't
separate strategy from execution." But her failure to fill the spot is
seen as one reason the H-P board fired her in February.
"Maybe [Diebold will] get down to a one-person company,
then it would be appropriate," said James McRitchie, editor of
Corpgov.net. "But I don't think it's appropriate when you're a public
company, where there should be transparency and accountability."
Sayan Chatterjee, professor of management policy at the
Weatherhead School of Management at Case Western Reserve University, said it's
very unusual for a chief executive to take on four roles.
"I've never seen it in a large company of Diebold's
size," he said.
Diebold spokesman Mike Jacobsen pointed out Friday that
O'Dell held the titles of chairman, president and CEO from 2000 to January
2004, when Evans was hired.
"We've got great depth in leadership at Diebold,"
he said.
Speculation hits Web
The news about troubles at Diebold also hit online opinion
sites where voting-rights groups long have criticized what they say are
security problems in Diebold's voting equipment.
U.S. Newswire carried a release saying that a
whistle-blower, "Dieb-Throat," was spilling the beans on practices at
the company.
The insider, when contacted by a reporter, described a
company groping to get its voting-equipment business stabilized after a series
of equipment malfunctions and sales setbacks.
"We have no response to that kind of nonsense,"
Jacobsen said.
Diebold shares closed Friday at $36.15, down 18.5 percent
from Tuesday's close.
To reach this Plain Dealer reporter:
agrant@plaind.com, 216-999-4758
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