March 05, 2007

"Diebold Weighs Strategy for Voting Unit"

"Diebold Inc. saw great potential in the modernization of elections equipment. Now, analysts say, executives may be angling for ways to dump its e-voting subsidiary that's widely seen as tarnishing the company's reputation.

Though Diebold Election Systems _ the company's smallest business segment _ has shown growth and profit, it's faced persistent criticism over the reliability and security of its touch-screen voting machines. About 150,000 of its touch-screen or optical scan systems were used in 34 states in last November's election.

The criticism is particularly jarring for a nearly 150-year-old company whose primary focus has long been safes and automated teller machines.

"This is a company that has built relationships with banks every day of every year. It pains them greatly to see their brand tarnished by a marginal operating unit," said Gil Luria, an investment analyst who monitors Diebold for Wedbush Morgan Securities Inc.

In the calm after the November midterm elections, Tom Swidarski, Diebold's chief executive officer, told analysts in a conference call that the company plans to announce its long-term strategy for the elections unit early this year.

Swidarski declined an interview request to shed more light on the voting segment's future.

But in an annual report filed last week with the Securities and Exchange Commission, Diebold's discussion of its election systems business pointed out various ongoing concerns. Diebold acknowledged that complaints about its voting products and services have hurt relations with government election officials.

Diebold indicated it still is "vulnerable to these types of challenges because the electronic elections systems industry is emerging." The report also mentioned inconsistency in the way state and local governments are adapting to federal requirements for upgrades in voting technology."

Posted by Randy Riddle at March 5, 2007 09:30 AM