Bold Diebold

ATM Maker's New Strategy Starts to Pay Off

ATM Manufacturing At A Diebold Inc. Facility Ahead Of Durable Goods Orders
ATM Manufacturing at Diebold.
  • Why it matters

    Why it matters

    By focusing on software and emerging markets, Diebold’s CEO, a German national, could give rival Wincor Nixdorf a run for its money.

  • Facts

    Facts

    • Mr. Mattes has cut costs by $150 million.
    • Diebold’s market value has increased 40 percent under the new chief executive
    • The company’s major rival is Wincor Nixdorf.
  • Audio

    Audio

  • Pdf

Andreas Mattes never imagined becoming the chief executive of Diebold, a company that builds and sells cash systems such as ATMs. Before accepting the position in 2013, the German manager had made a name for himself in California’s high-tech mecca, Silicon Valley.

The business Mattes was about to enter, cash machines, seemed a little boring and without much of a future compared to his previous work, the executive thought. On top of that was a move from sunny, vibrant California to provincial Ohio. “I had come to believe the same stereotypes about Ohio as everyone else,” Mr. Mattes said.

Once in his new job, though, the 53-year-old executive quickly changed his mind. Cash machines, he discovered, offered plenty of potential for high-tech development. For one, electronic payment systems such as iPay, featured in Apple’s latest iPhone, could inject new life into the business. And although Diebold was losing money at the time and its shares had plummeted, Mr. Mattes viewed the company as “a sleeping beauty.”

Mr. Mattes is one of only a few Germans at the helm of a U.S. company. Like Klaus Kleinfeld, the chief executive of Alcoa, he launched his career at Siemens. Since taking over the company 14 months ago, he has made Diebold profitabale – at least for the past two quarters. The company’s market value rose by 40 percent to $3 billion during this period. “Mattes is doing a good job,” said Mario Gabelli, founder of the investment company Gabelli Funds.

Mr. Mattes also fired hundreds of original Diebold staff to make room for new employees who previoulsy worked with IBM, HP and Oracle.

Founded by German immigrants in 1859, the North Canton-based supplier of cash machines has been able to establish a strong market position not only in the United States, but in numerous countries around the world with one exception – Germany. In Europe’s biggest economy, the U.S. firm has struggled to compete against its German rival, Wincor-Nixdorf.

When he started out, Mr. Mattes met up with 150 clients from around the world. What he quickly learned was that the “sleeping beauty” was more deeply asleep than he thought.

Management also lacked “focus,” Mr. Mattes said. It hadn’t yet arrived “in the 21st century,” concentrating too much on hardware and not enough on software, he added.

Mr. Mattes began reducing the number of systems to control manufacturing and administration. He also outsourced some internal operations to India. In the process, he saved $150 billion.

Mr. Mattes also fired hundreds of original Diebold staff to make room for new employees who previoulsy worked with IBM, HP and Oracle. He also hired programmers to develop new software systems.

 

Diebold 700-02 (2)

 

In the United States, Mr. Mattes sees opportunities with banks that are reducing the size of their branches and personnel, and relying more on self-service cash systems. Another area of growth is electronic security, which now accounts for 15 percent of the company’s revenues.

Business in Europe is picking up, too, especially in Spain and Great Britain, where cash machines were never exchanged due to the financial crisis, according to the executive.

Mr. Mattes also sees huge potential in emerging economies, such as India, which has comparatively few cash machines. One of the big challenges in these markets, he said, is the lack in reliable electricity supply. To overcome that hurdle, three months ago, Diebold launched a new cash machine equipped with a solar cell panel and rechargable battery system. “The demand is incredible,” Mr. Mattes said.

Diebold’s restructuring is far from over, according to Mr. Mattes. “We’ve just learned how to crawl,” he said. “But one day we’ll know how to run.”

 

Thomas Jahn is New York bureau chief for Handelsblatt. To contact the author: jahn@handelsblatt.com

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