Diebold, Inc.

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Diebold, Inc.

P.O. Box 8230
Canton, Ohio 44711-8230
U.S.A.
(216) 489-4000
Fax: (216) 588 3794

Public Company
Incorporated: 1876 as Diebold Safe & Lock Co.
Employees: 3,975
Sales: $543 million
Stock Exchange: New York
SICs: 3499 Fabricated Metal Products, Except Machinery and Transportation Equipment; 3669 Electronic and Other Electrical Equipment and Components, Except Computer Equipment; 3578 Calculating & Accounting Equipment

In the wake of the 1871 Great Chicago Fire, natural disaster proved a boon for Diebold Bahmann & Co. when word spread that all 878 Diebold safes in the area, along with their contents, survived the flames. The safes’ reputation as a haven from the elements came full circle more than a century later when Hurricane Andrew devastated much of South Florida in August of 1992. A bank executive in Homestead, Florida, the city that bore the worst of the storm, reported weathering 160-mile-per-hour winds in a Diebold safe. Over the years, the company has diversified considerably, becoming the international leader in the production and servicing of Automated Teller Machines (ATMs), while continuing to make safes, office equipment, and a variety of security and surveillance systems.

Charles Diebold first organized Diebold Bahmann in 1859, as a manufacturer of safes and vaults in Cincinnati, Ohio. In 1872, Diebold had outgrown its space in Cincinnati and transferred plant and headquarters to Canton, Ohio, where most of the post-fire orders were filled. In 1874, Wells Fargo of San Francisco chose Diebold to make what would be the world’s largest vault. In 1875, a special 47-car train transported the 32-foot-long, 27-foot-wide, 12-foot-high vault to San Francisco. In 1876, the company was incorporated under Ohio law as Diebold Safe & Lock Co. Following the Wells Fargo feat, Diebold continued to traffic in the colossal, selling the largest-ever commercial bank vault to Detroit National Bank in 1921. In 1968, the First National Bank of Chicago purchased the largest-ever double vault doors, with a combined weight of 87 1/2 tons. Size aside, the company’s abiding interest lay in developing equipment to stay one step ahead of bank robbers. In 1890, the company introduced manganese steel doors that were billed as TNT-proof. Through time, combination locks replaced keys, which could be copied. Safety hinges were introduced along with locks that jammed automatically after banking hours.

The company made a splash in 1954 by putting visually pleasing vault doors on the market. In the process of mechanically redesigning its bank vault equipment, the company canvassed bankers for suggested improvements to the standard. The overwhelming answer was that a plain slab of steel, particularly on the inside of the door—the side customers see—was an unworthy complement to a bank’s carefully decorated public spaces. The company then hired Charles Deaton, a St. Louis industrial designer, to retool both the interior and exterior of the vaults. Despite the fact that the newly designed vaults cost around twice as much as the simpler models, they dominated new orders from customers.

While better and more secure vaults and safes continued to be key features in Diebold’s product line, the market for safes and vaults has not always been dependable, relying as it does on the health of the banking industry. In the 1930s, Diebold began to diversify. In slightly over a decade, the company made seven major moves toward expansion. In 1936, the company acquired United Metal Products Co., also of Canton, a manufacturer of hollow metal doors and door frames. In 1938 Diebold made its first entrance into the office equipment business by introducing the Cardineer Rotary File System. This was followed in 1944 with the acquisition of the Visible Records Equipment Company of Chicago, a former subsidiary and a manufacturer of vertical filing systems and other record-keeping equipment. The same year, Diebold bought the patents and manufacturing rights for Flofilm, a process that allowed companies to microfilm records in-house with a one-hour automatic developer. In 1945, buying rights to the Safe-T-Stak Steel Storage File further augmented Diebold’s growing office equipment business. In 1946, Diebold bought the safe and vault business of the York Safe & Lock Company. Finally, in January of 1947, the bank equipment division of O. B. McClintock Co. of Minneapolis went over to Diebold. The products acquired from McClintock included burglar alarms, a bank vault ventilator (in case of lockins), and after-hour depositories.

Several factors motivated Diebold’s first expansion. World War II brought the safe and vault business as a whole out of rough years with a flurry of government armament contracts. Following the dismal economy of the 1930s, the war created a demand for manufacturers accustomed to high-precision work with hardened steels. For Diebold, as well as its main competitors York Safe and Mosler Safe Co., the war effort spelled a windfall. In 1942 Diebold, Inc., which had previously grossed around $3 million per year, brought in $40 million.

When the dust settled and the contracts disappeared with the end of the war, the company was fiscally sound but its executives were having trouble agreeing on Diebold’s path of postwar reconversion. Amid the confusion, Eliot Ness joined the company’s board in 1944. A former prohibition agent and Cleveland director of safety, he represented the Rex family, who owned the largest single block of Diebold shares (38%). Ness, who became chairman of the board, engineered a spectacular takeover of York Safe. Located in York, Pennsylvania, York was the largest prewar producer of safes and vaults, with a strong sales base on the East Coast. However, the company had let its sales division deteriorate during the war, while Diebold’s was intact. Seeing York’s weakness, Diebold moved in. The deal came together with the help of Clint Murchison, Sr., a Texas oilman and a friend of future chair and board member Daniel Maggin. Murchison arranged for several insurance companies to make loans to Diebold for the purchase and personally guaranteed them. Diebold acquired all of York’s patents, tools, service contracts, and orders as well as its sales branches. However, the York company had diversified to include plastics production and microfilm equipment and Diebold left the remaining business free-standing under the name York Industries, Inc.

In the 1950s, Diebold cashed in on America’s postwar migration to suburban areas, which created a demand for new bank branches and orders for safes as well as the full complement of office and security equipment. Thanks to its expansion during the 1940s, the company was able to meet the new demand for its products. The automobile-oriented suburban life brought buyers for the company’s drive-in teller windows, which Diebold had started selling after the purchase of McClintock, along with the Diebold-McClintock burglar alarm and several models of after-hour depositories. In 1955, Diebold acquired K. F. Kline Co., a maker of steel lockers, shelving parts, storage bins, and storage and wardrobe cabinets. The Kline acquisition, combined with Diebold’s previous business in record-handling and storage equipment, brought business equipment to account for approximately 50 percent of total volume in 1957.

In August of 1958, Diebold acquired the entire stock of Herring-Hall-Marvin Safe Co. of Canada, Ltd., which became Die-bold of Canada, Ltd. In September of 1959, Diebold acquired Herring-Hall-Marvin Safe Co. of Hamilton, Ohio. In addition to safes, Herring-Hall made teller counter equipment and the acquisition expanded Diebold’s range of service to banks even further. The U.S. government subsequently took the merger to court on anti-trust grounds, saying that Diebold and Herring-Hall were two of only three companies in the United States producing bank vault equipment. Southern District Court of Ohio dismissed the case on the so-called “failing company doctrine,” under which an acquisition in danger of anti-trust challenges could be justified if it can be shown that the object of a takeover is in such poor shape that its continued existence would not substantially alter the competitive environment. In 1961, the Justice Department asked the Supreme Court to review the case, saying that the defense should be less broadly defined. The high court recommended that the district court that dismissed the case should try it. In April of 1963, before a trial could take place, Diebold and the Justice Department reached an agreement. Diebold would sell the safe and vault part of the Herring-Hall-Marvin operation within the year and agree not to buy any other vault or safe companies for another five years. That limitation would be stretched to ten years if Herring-Hall was not sold within that time frame.

In the meantime, Diebold continued to expand. Along with the postwar growth in the number of banks in the country, the late 1950s and early 1960s saw an explosion in the per-person use of checks. This prompted Diebold to buy into the check-imprinting business. In 1963, the company acquired Consolidated Business Systems, Inc. and its subsidiary Young & Selden. That company was a maker of business forms and magnetic ink imprinting for checks. Diebold then sold off the business forms part of the business at a loss, but profitably ventured further into the check business with the purchase of the ThriftiCheck Service Corporation later the same year. Diebold sold some assets of Young & Selden in 1970 and all of ThriftiCheck in 1974. Diebold was first listed on the New York Stock Exchange in April, 1964, under the symbol DBD.

In 1965 the company added the products of the Lamson Corporation of Syracuse, New York, to its line of office equipment. A maker of materials-handling systems, Lamson became a division of Diebold. Among its products was a message-carrying system that used pneumatic tubes. When Diebold took over, it expanded the operations of the Syracuse plant and invested in research and development, resulting in the computer-regulated tube transport systems that were used to carry material between floors in large office buildings and continue to be used in driveup remote teller stations. In 1970, Diebold acquired Florida Development Services, a Clearwater, Florida company that made “modular” bank buildings. Those structures, used for small branch offices, could be transported to a site and assembled within 90 days. The following year the name was changed to Diebold Contracting Services, Inc. The concern was sold in 1979.

In the early 1970s, Diebold was faced with a slowdown in sales of security equipment. The company, led by long-time President and Chief Executive Officer Raymond Koontz, decided to respond by looking ahead and taking a chance on ATMs. Die-bold invested heavily in electronic research, applied computer technology, ergonomic design, and software development and, in 1973, introduced the first ATM model. The ATM trade turned out to be a natural for the company that had been doing business with banks for over a century. While Diebold was a relative newcomer to this type of computer technology, its experience with cash-handling systems and security concerns made Diebold ATMs an attractive choice for banks. Within five years, up against competing products from IBM, NCR, Burroughs, TRW, and Honeywell, Diebold had captured 45 percent of the domestic market. In 1979 banks using Diebold ATMs included Bank of America, Citibank, Marine Midland, and the Shawmut Corp.

Through the early 1980s, the business press portrayed Diebold’s ATM dominance over IBM and NCR as the pin-striped battle between David and a two-headed Goliath. “Those three letters I-B-M are the first thing we think of when we awake,” Forbes quoted Earl Wearstler, then Diebold executive vice president, as saying in 1980. But Diebold held its ground, working out a reciprocal sales agreement with Bunker Ramo, a maker of microcomputer-driven teller terminals with strong sales in Europe and the U.S. To gain access to the Canadian ATM market, the company signed a sales and service agreement with Phillips, the international electronics company.

In 1985 and 1986, ATM orders from banks sagged in pace with a general slowdown in bank equipment sales. Diebold had to cut back on costs, but kept the research and development funds flowing toward finding additional applications for ATM technology and aggressively sought out non-bank ATM buyers. In 1985, National Transactions Systems ordered 1,000 cash-dispensing machines to be placed in West Coast 7-Eleven and Safeway stores. In 1986, Diebold announced 26 new products. These included self-serve video rental machines, credit card-activated gas station pumps, and interactive video systems to be used for dispensing tickets and information. For banks that wanted lower-cost cash networks, they also came out with automatic teller machines that were smaller and performed fewer operations, such as dispensing cash but not taking deposits.

In July of 1990, Diebold, the company that professed to having nightmares about IBM a decade earlier, announced a joint venture with its erstwhile competitor, which was dubbed Inter-Bold. At the time, Diebold held a larger proportion of the domestic and world ATM markets than IBM, but the venture was designed to make the most of each parent company’s expertise. Diebold owns the majority share of the partnership, at 70 percent. Through InterBold, Diebold benefitted from IBM’s strengths in software development and systems integration as well as from the company’s strong position in Europe, Asia, and Latin America. Within a year of the venture, InterBold introduced the i Series TM ATM, the only model ATM that uses “image-lift” technology. Image-lift allows ATM users to see a picture of deposited checks on the ATM screen, and addresses customers’ fears about trusting deposits to the machines. As of 1992, InterBold had the only networked ATMs in Poland and held the leading position in Mexico, where the banking industry is in the process of privatization. As the former Eastern Bloc countries develop free-market economies and Western Europe moves toward increased economic integration, the demand for ATMs can be expected to expand rapidly through the 1990s.

At the same time, retail applications for card-activated transaction equipment continue to multiply. InterBold has developed a “multi-media dispenser” capable of self-service distribution of postage stamps, airline tickets, travelers’ checks, food stamps, and public transportation passes, among other items. In 1992, Diebold formed a joint venture with Nelson Vending Technology Limited of Toronto to distribute automated videocassette vending systems to convenience stores, drug stores, apartment complexes, business centers, hotels, hospitals, and other commercial centers.

AT&T, which owns NCR, remained Diebold’s major competitor in global ATM sales and service in 1992. In security products, Mosler of Hamilton, Ohio, Diebold’s century-old rival, was a major competitor, along with LeFebure Corp., Honeywell, and ATD Ltd. Diebold has maintained manufacturing facilities in Canton and Newark, Ohio, Lynchburg, Virginia, and Sumter, South Carolina.

Principal Subsidiaries

Diebold of Nevada, Inc.; The Diebold Co. of Canada, Ltd.; Diebold Investment Co.; DBD Investment Management Co.; Diebold Foreign Sales Corp.; Diebold Finance Co., Inc.; Diebold International, Inc.; Diebold Pacific, Ltd.; Diebold Holding Company, Inc.; InterBold; InterBold Pacific Limited.