Diebold (NYSE: DBD) is one of the largest manufacturers of ATM machines. The company also makes security products such as vaults, alarms, and safes, and has an election systems business that is based in Brazil. The company sells most of its products to banks, financial institutions, government agencies, and public libraries among others. In 2009, the company generated $2.7 billion in revenue and $29 million in net income.
Since 1995, the number of Americans that use ATM cards has jumped from 35 to over 65 percent. Also, rapid economic growth in China, Latin America and the Middle East has lead to expansion of the banking industry in those countries. The rapid growth of the banking industries in India and China as well as a movement towards self-service technology (ATMs, internet banking) have provided a quickly growing market for Diebold's products.
Diebold manufactures and sells three kinds of products:
The company, through its wholly-owned subsidiary Procomp Industria Eletronica LTDA (in Brazil), is a provider of voting equipment and related products and services. Diebold provides elections equipment, networking, tabulation and diagnostic software development, training, support and maintenance.
Diebold sells its products directly to its consumers, which include:
Diebold is divided into three segments:
ATM demand in India and China has increased in the past few years, fueled by the regions' prosperity. Increased buying power leads to growth in the financial services market. Relatively large portions of their populations still have limited access to banks, meaning commercial banks have an incentive to increase their presence. ATM machines are an effective way of increasing their presence without the cost of constructing an entire building and hiring staff. The number of ATMs in China and India have been growing at 705 CAGR since 2000.
Self-Service has expanded beyond just ATMs and gas stations. Advancing technology has allowed consumers to carry out more transactions on their own. Diebold is setting itself up to take advantage of this trend through securing five U.S. patents on technology that will connect mobile phones to ATMs. This new technology will let consumers find the nearest ATM and make withdrawals and wire transfers through their phones.
Identity theft is a constant threat to consumers throughout the country. Since credit card companies are making it harder to steal customer information, identity thieves have turned to skimming PIN numbers from ATM machines in order to gain access to others' bank accounts. Current estimates place average loss per ATM at $900 and $2.75 billion in total losses due to identity theft. Companies that manufacture ATMs thus have an interest in constantly upgrading their technology in order to deal with the threat of skimmers. However, more advanced technology tends to make the ATMs more expensive, so in order to keep selling as many as possible, the same producers cannot make the machines too expensive. Diebold has addressed this issue by developing new skimming detection technology (which usually costs between $1,200 and $1,500 per ATM) that is included in its new card readers at no extra charge
Diebold provides elections systems products. Competition in this market is limited and based upon technology pre-qualification demonstrations to the government. Due to the technology investment required in elections systems, barriers to entry in this market are high.