Despite being the target of a recent lawsuit, it has been business as usual at Diebold
With an impending presidential election just months away and fears of Florida's voting meltdown still lingering, one might think that Diebold's Election Systems subsidiary is facing a windfall of orders. Jurisdictions across the country have already replaced outdated voting equipment with state-of-the-art electronic voting machines. Millions of Americans will be casting their ballots on these machines this fall -- many of them on Diebold's Accu-Vote TS touch-screen units.
Voters using the system gave it high marks in exit polls, but fears of software glitches, reliability, and possible manipulation have kept demand in check. In fact, problems that surfaced in California have even prompted a lawsuit. As with any emergent technology, potential setbacks are all but inevitable, but Diebold and its rivals, such as the privately owned Election Systems & Software, will eventually perfect the process. With the aid of $3.9 billion in federal funds already approved by Congress and earmarked for election overhauls, Diebold is projecting up to $2 billion in revenues from this segment over the next several years.
Though the election systems segment is Diebold's fastest growing, with $27.1 million in second-quarter sales, it still makes up only a relatively small 5% of total revenues. The company's principal line of business is the manufacture, installation, and service of ATMs. Diebold has a commanding two-thirds of the domestic ATM market and trails only NCR
Diebold's security solutions segment revenues, which include a wide range of products and services, such as vaults, safe deposit boxes, and campus identification smart cards, grew 11% to $136.6 million. Overall, the company also booked record orders, expanded margins, and repurchased nearly 800,000 shares.
Electronic voting has many vocal detractors, but the practice has one key ally -- the federal government. This nascent industry should continue to grow rapidly, supplementing Diebold's other more established business ventures both domestically and internationally. Considering the company just received record product orders, and that most new orders are followed up with service contracts for stable, recurring revenues, the stock may have room to grow.
Fool contributor Nathan Slaughter visits his local ATM at least once per day, but he owns none of the companies mentioned.