Diebold Dumps Most of Its E-Voting Business

Sells Unit for 20% of What It Paid in 2002

2 min read
Diebold Dumps Most of Its E-Voting Business

Diebold Inc.announced yesterday that it had sold its U.S. election systems business, primarily consisting of its Allen, Texas-based subsidiary, Premier Election Solutions, Inc., to Election Systems & Software, Inc.. The company's Brazilian voting systems subsidiary, Diebold Procomp Industria Eletronica Ltda, isn't affected.

Diebold further said in its announcement that it,

" ... 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. "

In January 2002, Diebold bought electronic voting machine maker Global Election Systems Inc. (GES) of McKinney, Texas, GES was acquired, according to a Diebold annual report, with a combination of cash and stock for a total purchase price of $24,667,000. A cash payment of $4,845,000 was made in January 2002 with the remaining purchase price being paid with company stock valued at $19,822,000. Goodwill and other intangibles acquired in the transaction amounted to $41,029.000.

At the time, Diebold said that the purchase would make the company

 "a formidable player in an industry that is expected to generate $1.5 billion to $2.0 billion in revenue during the next four to five years -- in the United States alone."

The Wall Street Journalreported that in the second quarter of this year, Diebold's US electronic voting system business contributed only $9.6 million in revenue, or about 1.4% of Diebold's quarterly revenue.

Diebold thought it had entered a real growth business area, given the voting controversy following the US 2000 Presidential Election, and the fact that the US Congress passed the Help America Vote Act of 2002 which provided the states some $3 billion to replace their punch card  voting systems.

But Diebold found instead, nothing but endless misery both technologically (see here and here, for example) and reputationally.

As one financial analyst that covers Diebold said in response to the sale announcement:

 "Good riddance."

Diebold's foray into the electronic voting business has to join eBay's purchase (and subsequent sale) of Skype as one of the worst non-synergistic acquisitions of the past decade.

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