Diebold Inc. Unable to Get Rid of Electronic Voting Business

Diebold Inc., whose electronic voting technology is used in elections across the country, says efforts to sell the highly criticized business have failed and that instead it will allow the unit to operate more independently.

"These efforts to sell this company, however, have proven unsuccessful due in part to the rapidly evolving political uncertainties and controversies surrounding state and jurisdiction purchases of electronic voting systems," the company said in a statement.

The company also cut its revenue and profit outlook for the year for the unit.

Diebold said it would establish a separate board of directors to lead the elections unit and could create a new management structure. The new board will include independent directors.

Diebold said it has not ruled out the possibility of later selling a portion or all of its ownership in the realigned company.

"While we plan to fully support this business for the foreseeable future, we feel a more independent structure should allow it to operate more effectively," said Thomas W. Swidarski, president and chief executive.

Diebold Election Systems has had steady growth in sales and profits, but has become a lightning rod for critics of the reliability of e-voting devices. Critics questioned whether Diebold software running those devices could be manipulated.

Diebold often defended its voting machines and its own business intentions, even after its former chairman and chief executive, Wally O'Dell, sought with little success to convince critics his Republican politics and fundraising for President Bush were not the motive for the company's involvement in elections.

O'Dell resigned in 2005 and was replaced by Swidarski, who had led Diebold Election Systems.

Swidarski said establishing the elections business as a separate entity will allow the company to focus on its core businesses as a maker of automated teller machines, safes and other business security systems that made up 92 percent of Diebold's revenue in 2006.

Because of the upheaval in the voting-machine business, Diebold said it would lower its full-year revenue expectations for the elections business by about $120 million from its earlier full-year guidance of $185 million to $215 million for that segment.

The change will cut Diebold's full-year earnings by about 27 cents per share, the company said

Swidarski said decisions on buying voting equipment have been hurt by uncertainties over federal requirements, state reviews of the issue and earlier 2008 primary dates.

In last November's midterm election, Diebold had about 150,000 touch-screen optical scan voting terminals in 34 states. About 130,000 were touch-screens, which allow ballots in more than one language and record votes on memory cards. The devices are among the technology several e-voting vendors have offered to government election officials across the country to replace older voting systems, such as punch cards.

Voting technology updates were encouraged by $3.9 billion of funding for the Help America Vote Act of 2002, following the disputed presidential election in 2000 that came down to a highly scrutinized recount of punch-card ballots in Florida.

Swidarski told analysts in a Jan. 30 conference call that they intended to determine a long-term strategy early this year for Diebold Election Systems, formed after North Canton, Ohio-based Diebold acquired McKinney, Texas-based Global Election Systems in January 2002. Diebold's elections unit is now based in Allen, Texas.

That Diebold segment and competitor Election System & Software, based in Omaha, Neb., are generally regarded as the two leading voting systems vendors in the United States.