Bad press hurting Diebold's sales

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Diebold’s Election Division Jolted by Reliability and Security Concerns
Voting Unit Proves Drag on Earnings and Corporate Image

Washington, DC – Diebold’s Elections Division is in serious trouble. In this week’s delayed second quarter earnings report Diebold admits that negative perceptions of Diebold’s AccuVote TS and TSx voting systems have produced ‘lower revenue’ and lower ‘margin and earnings per share’. In its second quarter earnings report, Diebold had high hopes its Elections Division would prop up earnings in its troubled ATM division by 5% to 37%. These problems are likely to escalate as problems in the largest voting market in the United States, California, may cause Diebold to be excluded from that market.

After a dramatic 20% failure rate in a recent Alameda County demonstration, over 18,000 TSX voting machines sit idle in warehouses all over the California. Some governments have refused to pay for the units until the problems are fixed. Election officials in Alameda County are considering another supplier altogether. Diebold’s election problems come at a time when Diebold’s core business is suffering from price pressure and the overall down trend in ATM deliveries.

Elaine Ginnold, Alameda County’s acting registrar of voters, said problems reported in the recent tests have her seriously thinking about a switch of strategy in which the county would emphasize paper ballots using optical scanners rather than touch-screen devices.

Diebold provides election systems statewide in Georgia, and most of Maryland. These states use an older version of the AccuVote(R) touch screen the TS6, but critics say even those machines are flawed and prone to screen freezes and other Election Day
problems. Law suits alleging security and accuracy defects are pending in Maryland, and in Georgia Congresswoman Cynthia McKinney recently revealed an internal memo from Georgia Sectary of State Cathy Cox. Attached was a list of thirty problems with Diebold machines including lack of certification. Oddly Diebold is slated to deploy the troublesome and out of production TS6 in Baltimore City Maryland next month.

“The problems seen in California are consistent with problems with the Diebold election machines in other parts of the county. In Montgomery County, MD the IT report on Election Day 2004 found that up to 12 percent of machines failed totally or partially on Election Day. The same types of problems seen in the California tests — screen freezes, machine crashes, and error reports — occurred in Maryland on Election Day,” said Linda Scahde of TrueVoteMD.org.

Internally Diebold’s problems in California may trigger another management shake-up in the election division. Insiders say the recent departure of Gregory T. Geswein, senior vice president and chief financial officer was directly related to Diebold’s California problems. Second-quarter net income was $33.3 million, or 47 cents a share, down 24% from $43.6 million, or 60 cents a share in the year-ago period.

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