(ATM&Debit News)
The tough U.S. market for automated teller machine makers is about to get tougher.
Karl-Heinz Stiller, the chief executive of Wincor Nixdorf International GmbH, Europe’s largest ATM manufacturer, said last month that he wanted to acquire U.S. ATM companies.
Wincor, of Paderborn, Germany, has a relatively small share of the U.S. ATM sales market, and, like the two largest vendors, NCR Corp. and Diebold Inc., it has said it wants to increase revenue by promoting hardware upgrades, deposit-automation technology, and security products.
Analysts say Wincor also plans to build its ATM maintenance business, which provides recurring revenue. “Expanding its national service network is key to Wincor’s growth plans,” said Sam Ditzion, the president and CEO of Tremont Capital Group, a Boston hedge fund that specializes in mergers and acquisitions in the ATM industry. “Its chances go up exponentially if it can successfully create a national service network.”
According to ATM & Debit News' 2006 ATM vendor survey, Wincor has a long way to climb. In 2005 it was fifth in the U.S. market, behind Diebold, NCR, Triton Systems, and Tranax Technologies Inc., with only about 3% of ATM sales. Wincor sold 3,427 ATMs in the United States in 2005 and 3,608 in 2004.
Wincor, which serves the bank and retail ATM markets, ranked ahead of only three ATM makers last year: NexTran Industries Inc., Tidel Technologies Inc. (which was acquired by NCR in January), and Greenlink Technologies Inc.
Julia Waugh, Wincor’s U.S. marketing director, said the company services 70% of its U.S. ATMs directly, and the rest are serviced through an exclusive deal with International Business Machines Corp.
Though she said there are no plans to end that agreement — “our arrangement with IBM will continue” — she also said Wincor hopes to expand its ATM maintenance business in the United States and rely less on IBM by expanding the installed base of Wincor machines.
“As our installed base grows, we will have to increase our service coverage,” Ms. Waugh said. “In some areas, it will be better for us to service our machines, while in other areas, IBM has better coverage.” For example, Wincor has a deal to supply ATMs to Wells Fargo & Co. and provide maintenance for the 1,100 ATMs the San Francisco banking company already has.
In May, Benchmark Technology Group agreed to be an ATM reseller for Wincor in the United States, but it plans to steer clear of IBM clients, because IBM also resells Wincor ATMs. Benchmark will instead focus on a client list that does not include the firms targeted by IBM and Wincor’s internal sales staff.
Because Benchmark does not service ATMs, servicing the Wincor ATMs that Benchmark sells will be handled directly by Wincor, Ms. Waugh said.
Mr. Stiller said last month during a call on Wincor’s third-quarter earnings that making ATM-related acquisitions in the United States was a high priority. Though Wincor is a small U.S. player, it has “excellent initial customers,” he said.
Wincor would “strongly work to increase” its U.S. market share “within the next three to five years to a more significant level,” Mr. Stiller said. Besides Wells Fargo, Wincor’s U.S. ATM customers include the No. 1 casino ATM operator, Global Cash Access Holdings Inc. of Las Vegas, the U.S. Postal Service, and Susquehanna Bancshares Inc. of Lititz, Pa.
ATM servicing is highly competitive; both Diebold and NCR have national ATM maintenance units and are fighting for market share, said Dave Lott, an analyst with the Atlanta consulting company Speer & Associates. “Wincor has a small market share and no concentration, or critical mass,” he said. It “could take on clients and create a presence in urban areas. In rural areas, the cost of providing service is higher.”
Mr. Lott said financial institutions would rather work with a single vendor for every region than have separate ATM suppliers and servicers for different regions.
Mr. Ditzion said that in its acquisition search it will not be easy for Wincor to find ATM servicers that have the geographic and technical reach that national customers demand. “There aren’t many companies doing” both basic and highly technical ATM servicing, he said.
