Diebold (NYSE:DBD) recently announced that they cannot sell off their voting machine business. .In my Nov 8, 2006 post I had strongly urged them to do so. At that time, the private equity business and the madcap lenders who provided liquidity were ever so plentiful.
Today, they are saying the world has changed; private equity and liquidity are not as aggressive and they cannot offload the puppy - a convenient straw to grasp at. At the same time, one is reminded how sales have dropped so dramatically.
Diebold feels that many voting machine purchase decisions have been delayed. They need you to believe this, as the company is being positioned to be dividended out as a separate entity. Already, there is a separate board and a separation in corporate identity is occurring.
In a way, you cannot blame Diebold. The PR storms that occur around voting machines are vicious and unprofitable in any currency.
But if the voting machine purchase decisions where merely delayed, then investors who value stocks as the net present value of future earnings would be unperturbed because the earnings would still be coming. Sharp private equity should have been able to figure it out.
Maybe what the private equity guys figured out was that there are other problems. Senior officers of Diebold have been openly politically active with the Republican Party. If the trend is Democrat, there will be a lot of pay back and investors will suffer. If there is a back log, precious little will go to Diebold.
Doing a voting machine IPO during the Presidential election sounds suicidal. So how will Diebold offload this problem? My suspicions are that they missed the boat and it will hang around for some time, dragging down EPS and the corporate soul as they get battered in the political press.