ES&S Buys Premier (Diebold) Election Systems, for Near-Monopoly in U.S. Vote Count
Diebold Exits US Voting-Machine BusinessBy Veronica Dagher, Dow Jones Newswires, September 03, 2009
Diebold Inc. (DBD) has sold its money-losing U.S. election-systems business, just seven years after acquiring it amid hopes of rising demand for voting technology upgrades in the wake of the 2000 presidential election fiasco.
Diebold, whose main business is making automated teller machines, said Thursday it sold the voting-machine unit to privately held Election Systems & Software Inc. for $5 million, about one-fifth of what it paid in 2002.
"There were assumptions we made in that space that didn't materialize," Diebold spokesman Mike Jacobsen said, referring to the fact U.S. municipalities didn't adopt standardized voting systems.
'Diebold has agreed to sell its elections systems business
for $5 million in cash plus future cash payments
representing 70% of any cash collected on the outstanding U.S. election systems business accounts . . .
As a result of this transaction, Diebold expects to recognize a pre-tax loss in the range of $45 million to $55 million'
--from Diebold Press Release, 09.03.09
Problems with paper ballots in the presidential election in 2000, which delayed the final tally and generated concerns about the legitimacy of the outcome, sparked calls for improved election systems. A federal law was passed in 2002 to provide states $2.32 billion to make required voting-technology upgrades, and industry watchers had expected standardization to follow.
Standardization - in which all voting districts would use machines built to the same specifications - would have cut down on costs of customization, but guidelines were never finalized.
Diebold, which was the industry's biggest maker of electronic voting machines heading into the 2004 presidential election, was in the spotlight as concerns increased about the reliability and security of the electronic systems.
Diebold also suffered from a perception problem when the company's then-Chief Executive Walden O'Dell very publicly supported and fundraised for President George W. Bush in his re-election campaign.
In early 2006 the company, based in North Canton, Ohio, identified the voting-systems business as non-core and started exploring a possible divestment. It essentially separated the business from the rest of Diebold in August 2007, renaming it Premier Election Solutions. Since then, Diebold maintained only a financial interest.
In the second quarter, revenue for Premier Election tumbled 65% to $9.6 million, a fraction of Diebold's total revenue for the period of $700.5 million. The company wouldn't specify how much it lost in the elections business.
Diebold will record a pretax charge of $45 million to $55 million as a result of the sale. The company's Brazilian voting systems subsidiary isn't affected by the Premier Election sale.
Diebold shares gained 2.2% Thursday to finish at $30.69.
Election Systems & Software, based in Omaha, Neb., said in a release that the combination with Premier Election will allow each business to serve jurisdictions more effectively.
Wedbush Morgan Securities analyst Gil Luria said the U.S. elections business is past its 2006 peak, when municipalities were stocking up on election equipment. Luria estimates the U.S. elections industry to be a $200 million to $300 million a year business.
He said Diebold's exit leaves the top privately held competitors - Election Systems & Software and Sequoia Voting Systems - room to gain market share. "There could be more consolidation in the space," Luria said.
Copyright (c) 2009 Dow Jones & Company, Inc.
Diebold Press Release
SOURCE: Diebold, Incorporated
03 September 2009
Diebold, Incorporated (NYSE: DBD) announced today that it has sold its U.S. election systems business, primarily consisting of its Allen, Texas-based subsidiary, Premier Election Solutions, Inc., to Election Systems & Software, Inc. (ES&S), a leading company in the election systems industry. The sale was consummated on September 2.
Diebold has agreed to sell its elections systems business for $5 million in cash plus future cash payments representing 70% of any cash collected on the outstanding U.S. election systems business accounts receivable as of August 31, 2009. As a result of this transaction, Diebold expects to recognize a pre-tax loss in the range of $45 million to $55 million. The pre-tax loss includes the assets and liabilities of the business, certain retained legal liabilities, and other transaction costs. This business will be reported as a discontinued operation. Excluding the impact of this divestiture, Diebold's full-year earnings per share outlook for 2009 remains unchanged.
Diebold entered the U.S. election systems business after purchasing Global Election Systems, Inc., in January 2002. Since early 2006, Diebold has identified its U.S. elections systems business as non-core to its operations and has been pursuing strategic alternatives to ownership, including divestiture. In August 2007, Diebold announced it had realigned its U.S. elections systems subsidiary to operate as an independent entity and renamed the company, Premier Election Solutions. Since that time, Diebold has maintained only a financial interest in Premier with no direct operational involvement. In 2008, Premier generated $88.2 million in revenue, or 2.8 percent of Diebold's total reported revenue for the year.
The company's Brazilian subsidiary, which manufactures voting terminals for Brazil's national elections board, the Tribunal Superior Eleitoral (TSE), is not affected by the sale of Premier Eection Solutions.
Diebold, Incorporated is a global leader in providing integrated self-service delivery and security systems and services. Diebold employs more than 17,000 associates with representation in nearly 90 countries worldwide and is headquartered in Canton, Ohio, USA. Diebold is publicly traded on the New York Stock Exchange under the symbol 'DBD.' For more information, visit the company's Web site at www.diebold.com, or visit www.diebold.com/150 to learn more about Diebold's 150-year history.
SOURCE Diebold, Incorporated
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