Diebold Exits Voting Machine Business

ATM maker Diebold Inc. has sold its much-criticized U.S. voting-machine business to its bigger competitor, Election Systems & Software Inc. of Omaha, Nebraska.

Diebold, based in North Canton, announced the sale of its Allen, Texas-based subsidiary Premier Election Solutions Inc. on Thursday and said it will get $5 million plus payments representing 70 percent of collections of the unit's accounts receivable as of Aug. 31.

Diebold said it would disclose the additional payments at a later date.

Diebold expects to recognize a pretax loss on the deal in the range of $45 million to $55 million.

Last year Premier generated 2.8 percent of Diebold's revenue. Diebold faced repeated criticism of the reliability and security of its touch-screen voting machines and began looking for a buyer for Premier more than two years ago.

In 2007, Diebold distanced itself from the election unit, renaming it Premier, allowing it to operate more independently and giving it a separate board of directors.

Its touch-screen voting machines used in elections across the country often drew criticism that the technology could be manipulated. The company has insisted touch-screen voting is reliable and an improvement over punch-card ballots that resulted in the disputed recount in Florida during the 2000 presidential election.

The sale reflects Diebold's decision three years ago to focus on key markets, including ATMs and security systems, according to spokesman Mike Jacobsen. The company is determined to move forward and not reflect on past election-system problems, he said.

"The elections business has been a PR nightmare and a huge distraction for management," Gil Luria, vice president of research for Wedbush Morgan Securities Inc. in Los Angeles, told the Cleveland Plains Dealer.

"This has been a black eye for them for as long as they've owned it," he said.

Diebold's Brazilian subsidiary, which makes voting machines for Brazil's national elections board, is unaffected by the Premier sale.

Premier has about 180 employees in the United States and Canada. Premier operates in 33 states and ES&S operates election services in 39 states and overseas.

Aldo Tesi, ES&S president and CEO, said the company was determined to fulfill its responsibilities in the high-profile voting-machine market.

"This acquisition is an opportunity to continue fulfilling our company's core mission of maintaining voter confidence, and enhancing the voting experience," he said in a statement.

Candice Hoke, an election law professor at Cleveland State University, said the sale raises questions about the consolidation of election services. "It's a massive consolidation of voting-system vendors," she said.

The increased size and influence of ES&S could make it harder for smaller, innovative companies to enter the market, she said. "The market power (of ES&S) will be so significant," she said.

At the same time, Hoke said, ES&S's growth could allow it to spend more on research to develop better voting machines.