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Friday, July 14, 2006

Will House Hearings Impact Diebold?

We have a potentially important meeting scheduled for Wednesday, July 19 at 2:00 PM regarding voting machines, although it is possible there could be delays. This is merely a hearing and may go largely unnoticed since Israel's mini-war is taking all the prime-time news and since Federal Reserve Chairman Bernanke will be speaking around the same times on both Tuesday and Wednesday. The House Science Committee and the House Administration Committee have been scheduled to hold a hearing on whether the new standards and guidelines will prevent future questions about the accuracy and integrity of voting machines. These problems in the past have addressed issues such as computer hacks and not having voter-verifiable paper ballot printouts. Unfortunately newly deployed machines in the past have been met with reports of uncounted and improperly counted votes. This is all under part of the Help America Vote Act, and states received somewhere in the vicinity of $2.3 billion in 2004 to purchase new voting equipment.

Part of the reason that machine testing ahead of time on an independent basis has failed, is that not many want to bother testing this independently. Why not? Companies want to make money; and it may come as no surprise that the reason no one wants to be a tester is that very few businesses have found that voting machine testing would be a profitable and worthwhile business venture. When companies have to test their own controversial equipment themselves it can lead to a conflict of interest.

You should keep in mind that intent of this hearing is merely determining if the new standards will prevent or limit the perception of problems existing. This is not a hearing on whether or not the machines should be used. The implications are more reaching than the stated subject and intent of the hearing, and that is what needs to be considered.

So how does Diebold (DBD) tie in? Diebold is in the ATM manufacturing and many other automated machine segments, but they also are in electronic voting machines. If you will recall, they were also part of a negative wave of press around the implications of the CEO being accused of something to the tune of "we need to help re-elect president Bush". There were also reports of voting machine errors in Ohio in 2004.
Where is Diebold located? Oh yeah, in Ohio. I will not take a position on that, so if you want to turn that into a political debate I can send you to a neutral debate site.

For those that didn't notice, 2006 is an election year. This means that no one wants to have a "controversial vote count" due to any machine errors. If we have no controversies and if there are few perceived "error issues" in voting machines, then you could probably presume that it would be good for Diebold since their stock has been weak of late. If we have more perceived problems you can probably assume that they will be the center of controversy again. How will that go? No one can answer this accurately and there are probably very few that can answer that on an unbiased basis, so I won't try to predict it either. Diebold reports earnings the following week on July 25, so there may be two developing factors coming at roughly the same time.

Jon C. Ogg
July 14, 2006

contributions on timing of the meeting from Tony Brush

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