Diebold Inc. (DBD), the leading maker of automated teller machines, on Monday warned that third-quarter and full-year profits will fall below expectations due to problems at its electronic voting machine business.

The North Canton, Ohio, company cut its third-quarter and full-year earnings, citing costs for recertifying its electronic voting machines in California and for expenses related to a pending civil action in that state.

Diebold now expects to earn 67 cents a share in the third quarter, down from its previous forecast of 70 cents to 74 cents a share. Analysts, on average, expected Diebold to earn 72 cents in the third quarter, according to Reuters Estimates.

Diebold shares were off 1 percent in midday trading.

The company, which expects to record a fourth-quarter charge of a penny per share, also said it will now earn $2.54 to $2.59 a share for the full year. That view falls short of the average analysts' estimate of $2.64 a share.

Analysts see fourth-quarter profit of 92 cents a share. Analysts see the company earning $3.08 a share next year.

Diebold's costs spiked after questions arose about the reliability of all-electronic voting machines.

California Secretary of State Kevin Shelley in April accused Diebold, the state's largest e-voting machine supplier, of using "reprehensible" and deceptive sales tactics. The company's marketing led to the installation of touch-screen voting systems that were not tested and not approved nationally or by the state, Shelley said.

Attorney General Bill Lockyer also in April called for a criminal investigation of Diebold, alleging the company made false claims about its products.

California set tougher standards for electronic voting, including new security measures to prevent fraud. A paper trail, critics say, can help prevent election manipulation by computer hackers.

The state decertified Diebold's AccuVote-TSX Voting System (search) — used in four counties and representing one out of three California e-voting machines — because of problems in a March election that made actor Arnold Schwarzenegger governor.

By August, California agreed to allow voting at electronic voting machines this year in all but those four counties. Lockyer dropped the criminal probe, but said he would pursue a civil lawsuit against the company.

The company, in its statement Monday, said its Election Systems unit is making progress certifying a machine that would provide a receipt and meet the state's new requirements for use by 2006. The company's AccuVote-TS (search) and AccuVote-OS (search) machines, have been certified for use this year.

Diebold Chairman and Chief Executive Walden O'Dell also said the company has received "record order levels" for banking machines and security products during the quarter. The company sees earnings per share rising 18 to 20 percent next year.

The stock was off 37 cents to $47.99 on the New York Stock Exchange.