The Green Sheet Online Edition
January 14, 2008 • Issue 08:01:01
Triton layoffs changes, challenges
Last week's layoffs at Long Beach, Miss.-based Triton Systems didn't come as a shock to the ATM world. Falling profit margins, fierce price gouging and the relative maturity of the off-premises ATM space in the United States have taken their toll.
Phil Suitt, President of independent ATM sales organization ATM Ventures, is based in Spring, Texas, and has been Triton's No. 1 value-added reseller for the last three years.
He said Triton's decision to restructure was a good one and one that has likely secured its business in the United States - at least for a little while.
"I think changes had to occur at Triton at some point in time," Suitt said. "I think the depressed selling point of ATMs just accelerated Triton's fiscal situation. There were some missteps at Triton - quality has been an issue for some time. And that hurt its ability to be competitive, which also was probably a contributing factor as it related to their market share."
Dover Corp., the $6.5 billion New York-based company that owns Triton, announced plans to cut Triton's workforce in early November. Triton is expected to post million-dollar losses for the fourth quarter of the year.
The good news, Suitt said, is that a great deal of change has occurred since the hiring of Chief Executive Officer Bill Johnson, who joined the company in August.
Triton has touted Johnson for his strengths in manufacturing and operations logistics.
"I think Triton will recover well, and I think they will do much, much better," Suitt said. "I think they'll be competitive." No doubt, say some, the company's restructuring is a reflection of Dover pulling in the reins.
Sam Ditzion, President and CEO of Boston-based Tremont Capital Group, a strategic-planning and merger and acquisition consultancy that advises ATM companies, said the changes at Triton reflect a larger dynamic.
"This kind of change in the industry is what everyone is talking about right now," said Ditzion, who points out that Triton's losses for the fourth quarter are expected to be between $3 million and $5 million.
"We see it with all of the manufacturing players in the nonbank [ISO] sector. There has been a pricing war in the nonbank ATM market for some time now."
One need only look back a few months to see the parallel Ditzion is drawing. In early August, Newark, Calif.-based Tranax Technologies Inc. said it planned to lay off and shuffle employees to improve efficiency.
"We moved people around," said Bill Dunn, Tranax's Vice President of Sales. "We had to have more engineers; and in doing that, we reduced our staff. We couldn't have, nor did we need, dual function, so we kind of merged engineering and the technical side together.
"We also changed our marketing side a bit. We decided we couldn't spend [money] like we used to, with all of the tradeshows, the lavish distributor meeting and so on. Those are a thing of the past."
The last couple of years have been tough for ISOs and the manufacturers that serve them, Dunn said.
"The industry has suffered a lot this past year - there's no question," he said.
"And it happened because of 'dumping' - when you sell things for a price below what they are worth. It kind of made people step back and look at how we run our business." Long story short: "Everybody had to get more efficient," Dunn said.
And though Dunn pointed out that Triton's layoffs were more "massive" than Tranax's, he said the layoffs will likely strengthen Triton.
Of Triton's 400 or so U.S. employees, about 15% were reportedly let go. Tranax, which has 70 employees, let between 17% and 18% of its workforce go in August.
"They let more people go than we even have in our company," Dunn said. "But I don't think it's all doom and gloom. The good news is that you have two manufacturers in this space that recognize the changes taking place and did things to address it. Triton and Tranax are not only gearing up for today, but also for the future."
For Tranax, that gearing for the future includes a focus on multifunction ATMs. For Triton, it includes a renewed focus on core retail products and markets.
Brian Kett, Triton's President, said 2007 marked the first year Triton had to think about strategic growth since being hit by Hurricane Katrina in August 2005 - an act of nature that knocked Triton's facilities out of business for a good two weeks.
That knock, coupled with increasing competitiveness in the North American ATM market, pushed Triton to change.
"We've been a market leader in the U.S. retail market and in other countries for some time now, and we've decided to refocus on that core business," Kett said.
"We're looking at the retail business and the banking business in Africa, Australia, the U.K., Mexico and Canada - those markets where we have broad-based support."
He said the company also plans to focus on "select" Asian markets. "The last time we really repositioned ourselves was  when the core retail market dropped after the fall out of CCC [Credit Card Center]," which in 2001 filed for bankruptcy and pulled down with it Carrollton, Texas-based Tidel Engineering LP, now EasyPoint ATM LLC. Tidel had been ISO CCC's largest ATM supplier.
"We repositioned ourselves as a result of what's happening in the market," Kett said. "We see this as a similar time and as part of the evolution of the market."
Once a dominant force in the industry, the former Tidel Engineering, since its sale to NCR Corp. in February 2006, has flown under the radar.
Some in the industry argue that's because the once-mighty retail ATM force - which during its heyday stood beside Triton and Tranax - is now a noncompetitor in the U.S. retail market.
But Brad Lozier, NCR's Vice President of Product Management for NCR's Financial Solutions division, said price-gouging has hurt the retail market, and it's been a practice NCR (and EasyPoint) has steered clear of - hence its apparent fall from the U.S. market.
"To me, in this environment, it's a thin margin to begin with," Lozier said. "The margins in this ISO market
are thin, and then with the price decreases, it hurts everyone."
Lozier points to thin profit margins, maturity of the U.S. market, and price-cutting and ISO consolidation as three factors that have contributed to manufacturing cuts.
"I think the actions that Triton took were just inevitable, and I think a return to regular pricing is inevitable as well," he said.
Ditzion is somewhat unsure. And that's because Ditzion sees a fifth factor - Nautilus Hyosung's market entrance. Ditzion said Hyosung, which is owned and backed by $5.6 billion Seoul, Korea-based Hyosung Corp., has shaken the U.S. retail market since it opened its Texas base in June.
A larger force
Ditzion said Nautilus Hyosung has been able to undercut Tranax and Triton on pricing. And since its break in January 2007 from Tranax, which had worked as Nautilus Hyosung's U.S. ATM distributor, Nautilus Hyosung has gained a significant place in the U.S. market.
"They have aggressively gone into this business," Ditzion said. "It would be hard to not jump ship from anyone else and go to them.
"They have a good product, lower pricing and better perks to distribute. But on the flip side, one of the weaknesses they have is that their parts are very expensive, so if the machine does break and you have to get parts, it's expensive to fix."
But Ditzion said the high cost of parts is less of a concern for ISOs that focus on selling ATMs versus owning ATMs, since replacing parts isn't something they worry about after a machine is sold to a merchant.
Carlos Siewczynski, Vice President of Retail Self-Service for Nautilus Hyosung's U.S. base, said Nautilus Hyosung has sold more than 11,000 units in the United States since opening its U.S. base. The company also has built its number of U.S. distributors, which now total 100.
Companies with back-up
The future remains uncertain for ATM manufacturers that focus on the nonbank ISO business, Ditzion said.
All are feeling margin pressures as a result of the pricing war, but those with the backing of large, publicly traded companies will likely find a way to survive.
Triton with Dover, NCR EasyPoint with NCR, and Nautilus Hyosung with Hyosung all have solid backing. How Tranax, which is out on its own, will fare remains to be seen, Ditzion said. "Tranax is trying to differentiate, and that could work for them," he said.
"Tranax had been experiencing strong growth prior to its separation from Hyosung, and because Tranax doesn't have the backing that the other companies have, it will be interesting to see how they perform."
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