-Caveat Lector- from: http://chicagotribune.com/business/printedition/article/0,2669,SAV-0101090061, FF.html Click Here: <A HREF="http://chicagotribune.com/business/printedition/article/0,2669,SAV-01010 90061,FF.html">Chicago Tribune | Print Edition -- CAN DIMPLED …</A> ----- CAN DIMPLED CHAD MAKE INVESTORS SMILE? By Brian Edwards and Ryan McGrath Special to The Tribune January 9, 2001 Fresh from the election debacle in Florida, it appears that manufacturers of voting machines might emerge as the only clear winner. Nightmares of hanging, pregnant or dimpled chadmight be enough to prompt municipalities and election boards to upgrade their outdated equipment before the midterm elections in 2002. The industry has traditionally been an obscure one to most Americans -- if they thought about voting machines at all. The player with the most name recognition, Canton, Ohio-based Diebold (New York Stock Exchange: DBD), is better known for manufacturing cash machines than voting machines. Most of the other companies are far from household names, including the privately held Election Systems & Software, as well as publicly held companies such as Global Election Systems (Toronto Stock Exchange: GSM) and Sequoia Pacific Systems, a wholly owned subsidiary of Jefferson Smurfit Group (NYSE: JS). But the 2000 presidential election opened the curtain on problems with the technology behind democracy. Fixing those problems could present the industry the greatest opportunity in its hundred-year history: Some analysts estimate the cost of upgrading the nation's voting system as high as $8 billion. "Florida definitely changed the rules," said Larry Ensminger, vice president of corporate development for Global Election Systems. "It clearly focused awareness on the voting machine market and changed the dynamics. Updating the current systems has been given a higher priority in county government budgets." But before investors get too excited about this potentially lucrative market, analysts warn that it may be too early to declare a winner. Of the numerous challenges surrounding such an upgrade, the largest lies in the hands of the decision-makers themselves: politicians who serve the local municipalities and election districts, who must balance the need for newer voting machines with other competing budget items. "Who's going to pay for the machines?" asked Matt Wolfersberger, an analyst with Cleveland-based McDonald and Co. "Upgrading the current voting system is a fairly costly proposition. This is theoretically a great market, but practically speaking, there are limited budgets. "Voting machines will have to compete against other priorities, unless the federal government gets behind these districts and offers, for example, matching funds." Americans publicly support plans to upgrade the current system of voting machines. According a recent survey from The Gartner Group, an e-commerce research firm, 50 percent of Americans would be willing to cast their votes on an electronic touch-screen similar to an automated teller machine. "It is obvious that funding from the federal government is key to upgrading the current system, " said Jay Stevens, an analyst with New York-based Buckingham Research Group who covers Diebold. "There certainly is not going to be negative growth in this market." Companies like Diebold, which posted revenue of $1.27 billion through the first nine months of 2000, have already experienced growth. Analyst Tony Manacchio of Cleveland-based Midwest Research says that Diebold, which recently acquired a Brazilian company that builds "foolproof" electronic voting machines, has already experienced a 42 percent spike in stock price since November, trading as high as $34 per share Though his company has rated Diebold a "buy," the voting machine business hasn't won Manacchio's vote yet. "If people are trying to value the voting machine business, it is probably too early since there is no telling where this will go," Manacchio said. "There is a lot of editorial commentary out there about how we are going to fix the current voting system, about why we are voting the same way we did 50 years ago. "But we stress that is not a driving force at this point in recommending the stock. This could turn into a nice opportunity in the future, but this point in time it is still too early." Wolfersberger notes that his institution also rates Diebold a "buy," but cautions that buying the stock based purely on the election coverage is misguided. Sequoia Pacific Systems, which also manufactures voting machines, could also be positioned to pick up some business. But Mark Wilde, an analyst with New York-based Deutsche Banc Alex. Brown, Inc., said that voting equipment is such a tiny piece of Jefferson Smurfit's business that it would be unlikely that any post-election splurge would affect the company's stock price. The industry's largest player is privately held Election Systems & Software, an Omaha-based company whose machines have counted more than 60 percent of the U.S. national vote over the last four presidential elections. Because the company is so tightly held, it is doubtful that ES&S will enter the public arena in the near future. But companies like Vancouver-based Global Election Systems still see plenty of opportunity. Global Election Systems is a pure-play voting machine manufacturer that makes two types of voting machines: an optical scanning machine and a touch-screen, ATM-like machine. Global Election System's stock experienced a jump of 46 percent early in December following reports of bungled vote tabulations and recounts in Florida, trading as high as $2.95 per share. With the excitement surrounding the election dying down, the price has settled back around $2. Ensminger notes that Global Election System's voting machines were used in 17 Florida counties in November and that few of those counties reported the same type of problems that plagued other counties in the course of the election and recounts. Global Election's machines are currently used in 854 jurisdictions in 35 states as well as in five Canadian provinces. Ensminger said that his company's advantage is that its products are created from the ground up, with a single piece of software that drives both types of systems. Because of the election, Global Election has already entertained inquiries from county governments across the U.S., including four or five counties in Florida. "As we like to say, nobody wakes up and says, `Today, I'm going to buy a voting system,'" Ensminger said. "But with the recent coverage on the voting systems in Florida, it is likely that more voting machines will be sold in the next two years than in the last 10." <A HREF!ttp://www.ctrl.org/">www.ctrl.org</A> DECLARATION & DISCLAIMER ÝÝÝCTRL is a discussion & informational exchange list. Proselytizing propagandic screeds are unwelcomed. Substance—not soap-boxing—please! These are sordid matters and 'conspiracy theory'—with its many half-truths, mis- directions and outright frauds—is used politically by different groups with major and minor effects spread throughout the spectrum of time and thought. That being said, CTRLgives no endorsement to the validity of posts, and always suggests to readers; be wary of what you read. CTRL gives no credence to Holocaust denial and nazi's need not apply. Let us please be civil and as always, Caveat Lector. 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