Thursday, September 2, 2004

The trouble with e-voting - Aug. 30, 2004

By Paul R. La Monica, CNN/Money Magazine, August 30, 2004


Considering all the controversy about hanging chads and butterfly ballots four years ago, you would think a company that makes electronic voting machines would have a banner year in 2004.

But for Diebold, the largest manufacturer of touch screen voting machines, that hasn't been the case.


Mike Jacobsen, a spokesman for Diebold said that Diebold has never had security lapses with any of its voting machines but that it has nonetheless taken extra steps during the past few months, including adding enhanced encryption technologies, to ensure that there are no problems this November.

Jacobsen said that between 8 million and 9 million registered voters in parts of Georgia, Maryland and California would be using its machines this November. He added that the federal government would hopefully issue more guidelines about standards for electronic voting, including the need for a paper trail, in the coming months.


Analysts estimate that Diebold controls about 50 percent of the electronic voting machine market, which could generate between $1 billion and $2 billion in revenues over the next few years.

Sequoia Voting Systems, owned by British printing firm De La Rue, and Election Systems & Software (ES&S), a private company based in Omaha, are two of Diebold's top competitors in this business.

But what's more frustrating for investors is that the focus on the relatively small election systems business has overshadowed Diebold's strong position in ATMs and security devices.

"The election controversy has had a negative impact on Diebold's stock," said Kartik Mehta, an analyst with FTN Midwest Research. "The remaining 97 percent of the business is doing extremely well."


But Franklin's Taylor wonders whether it's worth the hassle for Diebold to stay in the election terminal business. He thinks that even though the company has now barred executives from engaging in political activities, that won't completely silence the company's critics.

"If you get into next year and Diebold's ownership is still a problem, the company should be able to sell it. I don't think they are absolutely wedded to the voting machine business," said Taylor.

Jacobsen said, however, that Diebold is committed to the election systems business, pointing out that there is also strong potential for growth internationally. Diebold has a subsidiary in Brazil that makes voting machines used in that country.

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