"I'm getting better." ... "No, you're not; you'll be stone dead in a moment." -- from Monty Python and the Holy Grail
Much as I've enjoyed pumping bullets into Diebold (NYSE:DBD), this troubled maker of ATMs, security systems, and electronic voting machines isn't dead yet. And in fact, if new management can walk the walk and keep up the self-improvement talk, this company could once again be a cash machine for investors.
For now, though, things are still pretty much awful. Oh, sure, sales growth looked all right -- up more than 16% -- but margins were down (with or without restructuring charges), and cash flow is looking a bit uglier as well. On that last point, I'd also note that while cash flow is down, it is not out -- it's still free cash flow-positive.
Revenue growth was mixed across the businesses. Security products and services saw a 21% boost, and election systems were up strongly (from a very low base). The lottery business also chipped in about $19 million that wasn't there a year ago. But as Dover's (NYSE:DOV) report suggested, all is not wonderful in the financial-services business, and Diebold's revenue here was up just 4% for the quarter.
Diebold management has announced a lot of flashy efforts to try to get this business back on the right track. The folks who lead the company are looking to move financial-terminal production to Eastern Europe, restructure costs out of the business, establish a multiyear improvement plan, and implement an enterprise resource planning (ERP) software system. That's a lot to bite off at one time, especially given the chaos that ERP implantations so often cause with companies.
I'm going to hang on to my skepticism here just a little while longer. I'm hearing the right things from Diebold (for a change), but I'll be even more constructive on the stock when I starting seeing the right things. And with that in mind, you can probably imagine that I'd want a nice, fat discount to fair value to entice me into these shares today.
You'd be right. And I just don't see today's price as quite interesting enough to me. Now, I'm not saying the shares can't or won't go up. In fact, I think there are quite a few investors out there who want to like these shares and will get enthused by incremental signs of progress. I'm just saying that, for my money, I see better options elsewhere.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
