Diebold Reorganizes, Renames Its Election Systems Unit

In an attempt to distance itself from a swarm of negative publicity surrounding security integrity problems plaguing its voting machines and servers, Diebold, Inc. announced this morning it is renaming its Election Systems unit to Premier Election Solutions, and restructuring it to give its new board of directors greater independence from the parent company.

While the news from Premier this morning sounded upbeat and hopeful, that message was indeed independent from that of its parent, which glumly announced it had failed to achieve its principal goal of selling the election systems division outright.

Diebold blamed two factors: all the bad news, and the recent plunges in the stock market. "Diebold and its financial consultants have been actively engaged with a number of strategic companies and private investors with the intent to divest the Diebold Election Systems subsidiary," the company stated this morning. "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. Given this changing business environment and the recent downturn in the capital markets, Diebold has postponed its efforts to divest the company and instead is realigning the election systems subsidiary to allow it to operate as a more independent entity, with Diebold maintaining a financial interest in the company."

Those factors, the parent company said, have been compounded by recent federal legislation which, Diebold stated, created "uncertainty amongst the jurisdictions that make purchasing decisions." Though it didn't cite bills by name, one introduced last April - HR 811, the Voter Confidence and Increased Accessibility Act of 2007 - would launch a massive federal reassessment of all devices used in federal elections. The goals of that reassessment would be threefold: 1) to strengthen the reliability of paper trails produced by e-voting machines; 2) to set new federal standards for internal security; and 3) to make such machines more accessible to the handicapped and to non-English speaking residents.

It's the preparation for such a reassessment, Diebold flatly admitted today, that's prompting it to cut its own revenue projections for this fiscal year by $120 million - more than half.

In Premier's independent statement this morning, Dave Byrd - who shall remain the division's president - said his company will be focused on objective #3 on that list: "We are going to increase communication with our customers and with the election community. Premier offers products and services that let voters cast ballots in English, Spanish and many other languages, and we will also continue to develop products that help people with disabilities vote without assistance, on the same voting equipment and with the same ballots as other voters. Premier has a very strong legacy of innovation and customer service, but our mission is to take our performance to the next level."

While Byrd and his Premier team are working on that problem, Diebold is ready to move on to something else. As its CEO, Thomas W. Swidarski, stated today, "Establishing the elections business as a separate entity will also allow our senior management team to fully focus our efforts on Diebold's core global businesses in financial self-service and security."

Last October, the Diebold name became the focus of controversy, as years of lawmaker concerns – and later outright disgust – rose to epic proportions, casting its entire gubernatorial election process in doubt. Then just weeks ago, after a University of California, Davis study exposed unresolved dangers in Diebold AccuVote systems’ integrity, the State revoked its certification along with that of three other systems. In the interim, Diebold was the subject of critical examinations in Ohio, Alaska, and Texas.

In just a few years’ time, the name which was originally synonymous with automation became inexorably linked with insecurity. It was finally too much for the parent company. Following today’s news, Diebold stock lost over 6% of its value on the New York Stock Exchange, which was already experiencing a 300+ point drop by early afternoon.