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Diebold Unplugged...Page 2 Rick Gagliano | 12/19/05
On Tuesday morning, news of O'Dell's resignation begins to make the rounds, but in one of the more curious events of the week, investment banking firm Jeffries and Co. upgrades Diebold from Hold to Buy.
Yahoo Finance and their affiliate Briefing.com, post the upgrade, with no further information on the internet just after 6:00 a.m. ET, prior to pre-market trading. Shares of Diebold opens regular trading at 40.25, rise to as high as 41, but soon backed off.
By mid-day, with shares of Diebold trading in a range between 39.50 and 40, the AP, in a story titled, Diebold Shares Rally on CEO Resignation, quotes the now two analysts - KeyBanc Capital Markets analyst Matt Summerville and Yvonne Varano of Jeffries & Co. - who see O'Dell leaving the company as a positive development. Summerville, who merely reiterated a "buy" rating he had maintained since November 14, said, "The chief executive change should pave the way for further restructuring and gradual restoration of credibility and investor confidence," while Varano, who had been critical of O'Dell in the past, says only that her previous "hold" position "had been a reflection in part due to management issues."
Varano had previously, on September 22, downgraded Diebold from a buy to a hold following the company's dismaying 3rd quarter profit forecast, when O'Dell blamed Hurricanes Katrina and Rita for delayed deliveries of ATM machines to bank customers in the Gulf of Mexico region. O'Dell, on September 21, said that third quarter revenue from ATMs would be off by as much as $50 million and income from voting systems would be $10 million short of previous projections.
Back then, Diebold shares ended the week, on Friday, September 23, trading at $36.15, down 18.5% from Tuesday's (Sept. 20) close of 44.13.
But on the afternoon of Tuesday, December 13, with the news cycle being contained by the company spin doctors, life for Diebold executives was about to go from bad to worse, much worse.
Brad Friedman, who has been following and reporting on the exploits of Diebold and related election issues since shortly after the November 2004 elections on his web site, the Brad Blog, had issued an alert a week earlier, communicating to his mailing list subscribers that Diebold was soon to be in the cross-hairs of certain class-action lawyers. Friedman published his "breaking" news story on the pending lawsuit on his site.
To make matters worse, in Leon County, Florida, wherein resides the state capitol of Tallahassee, Bev Harris of Black Box Voting (blackboxvoting.org) and a team of tireless researchers, including Herbert Thompson, a computer-science professor and strategist at Security Innovation, conducted a "hack test" on a Diebold Optical Scan voting machine. In a stunning and damming to Diebold story, Harri Hursti, a computer programmer and advocate for fair elections from Finland, managed to easily preprogram a memory card and completely flip a test election. After recording votes which should have read Yes: 2; No: 6., instead, when the votes were run on a results tape from the optical scan machine, the tape read as Hursti had preprogrammed them: Yes: 7; No: 1. The memory card was then inserted into the GEMS central tabulator and the same result of Yes: 7; No: 1 was displayed and accepted, proving that Diebold's Optical Scan and GEMS central tabulator could be hacked without detection.
Once again, the news slipped into public view after the close of trading on the NYSE. Diebold shares ended the day relatively unscathed, actually $2 higher than on Monday, at 39.74.
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