The interview with President and CEO of Wincor Nixdorf E. Heidloff published in Börsen-Zeitung
Mr. Heidloff, speculation about a takeover again electrified Nixdorf’s shares on Wednesday. Is there any truth to the rumors?
There have been rumors that we’d merge with Diebold since we were carved out of Siemens in 1999. Siemens had held talks with Diebold, and it’s also been a recurring subject of discussion among private equity owners. It apparently seems that speculation is fueled by the fact that there’s such a clear boundary between our markets: Diebold is strong in the U.S. and we’re strong in Europe. But from our perspective, a merger with Diebold wouldn’t make sense. We believe that 1 + 1 would make less than 2 in this case. Moreover, the cost and effort involved in restructuring and integration would be enormous. That would paralyze both companies.
Does Diebold see things the same way?
I can’t speak for Diebold; you’d have to ask them yourself. We’re convinced our strategy of organic growth is the right one and also in the interests of all our stakeholders. Our industry needs to put its own house in order – and that would not automatically be achieved by a merger. That’s why we believe that the path of independence is the right one for us.
Do you fear a hostile takeover?
My fear factor is very limited for good reasons.
It was said at the beginning of April that you were seeking funders for potential acquisitions. Such rumors don’t spring up out of nothing.
That’s a different situation. We’ve always said that we’ll also speak to other component manufacturers about cooperation deals and partnerships as part of the restructuring program. We don’t have any reservations as regards developing products further together with competitors. That’s why there is more information in the market. However, we were never set on repositioning the whole company as a result.
As part of the restructuring program, you told shareholders they would face a lean period of two more years. How do you intend to keep their allegiance?
It’s my impression that our shareholders believe in the company’s restructuring. Incidentally, we’ll remain in the black despite the restructuring. In addition, the program will deliver a pretty significant boost to earnings as early as next year.
Can you put a figure on its impact on earnings next year?
The earnings contributed by the restructuring will fully offset its costs next year. This year we expect operating income before the restructuring of €100 million; however, there will be extraordinary expenses of €80 million. Next year it will be €40 million by comparison, with the result that earnings after restructuring would again be around €100 million.
You spoke of the company opening up to partnerships. What does that mean with regard to the hardware business, which is causing you such great problems?
That means in particular that we no longer have to do everything ourselves in the hardware business. We don’t need our own coin system development and every technology down to the last detail. We can imagine developing components with partners. We’re strongly committed to standardization and so are willing to hand over components to competitors as well.
Does that mean you would even hand over components to your biggest rivals Diebold and NCR, for example?
Yes, definitely. There’s no reason why we shouldn’t sell core components to these companies. We already do that to a small extent. That is due to the fact that the market has changed because the pressure to cut costs is so high. Basically, it’s like in the automotive industry, which is also setting store by standardization. Standardization helps customers, yet also helps the industry cut costs. For instance, there’s a security initiative we’ve launched together with Diebold.
Wouldn’t standardization as a next step necessarily create more conducive conditions for a takeover or at least make it easier?
No. Despite standardization, every company will retain its own position in the market, with its own technologies and core competencies and not least its own customers.
As part of the restructuring, you intend to make “cashless payment” independent and open it up for third parties. What possible partners are there for you?
We’ve a very strong software and middleware portfolio, both for cash payment and cashless payment. We want to rid ourselves of our image as just being a manufacturer of automated teller machines. That’s why we want to carve out our Payment division, which last generated sales of €50 million, with the goal of controlling the company long term with a 51% stake. We want other shareholders to take up the other 49%. In the first stage, we can imagine including customers and technology partners in that. However, the final goal is to float 49% on the stock market.
What’s the timetable for that?
The carveout is to be completed by September 30. The company is growing very strongly and will grow its sales to €150 million by fiscal 2017/2018. The big advantage of a flotation is that we then have an acquisition currency in the form of shares. Payment solutions have great growth potential as a start-up and that would be reflected in its valuation. That means it can take new growth paths.
Do you believe there is sufficient interest in such a start-up company among investors?
We’ll definitely find investors, because the issue of payment – how payments are made, how various apps and wallets are used, how to create security – is a huge one. We know the end customers, i.e. banks and retailers, and we also know the security requirements. That means we’re able to discuss the issue on a relatively board scale. We can cooperate with young technology developers. The banks also have a keen interest in using payment solutions as a sales argument. What’s important now is to go to market quickly enough with our own, innovative products.
Aren’t you a little late, now that ApplePay and payment systems from Google and Facebook are being discussed. Conversely, there is a lack of willingness to invest on the part of banks because it’s not clear what solution will ultimately become established.
We see this form of digitization as being precisely where our opportunity lies. Our solution can handle all possible apps and payment systems. It’s at home in the world of the Internet, yet also fulfills all security requirements. We’ve solutions that deliver simplicity to deal with complexity. We’re coming from the direction of our customers, retailers and banks, who all want solutions. At the same time, however, they also want to have the freedom to make restrictions individually.
Should your solution be understood as an interface between the payment providers and the bank?
Yes, as an interface to the retailer. Our system enables any form of payment, but can also be used for handling storage and orders, for example – and all of that in a secure environment.
All in all, digitization is the key issue among your customers, isn’t it?
That’s precisely why the issue also opens up great growth potential in software business. Digitization and omnichannel are new challenges for our customers and we can help them overcome them. Since our customers have to be more responsive to end customers, we have geared our software portfolio in such a way as to make a lot of matters far more convenient for end customers.
When do you believe we journalists will stop writing about the “hardware vendor” Wincor Nixdorf?
In the not too distant future. Quite simply because digitization is changing all areas of society and life at a speed no one could have imagined a short time ago. We’re committed to hardware because it’s important. At the end of the day, it enables differentiation and individualization for customers. However, the growth is clearly in the fields of software and services. We’ve doubled our sales there in the past ten years. We’ll do that again, but this time a lot faster. That means our company’s restructuring has to move forward.
What will be the sales split between hardware on the hand and software/services on the other in five years’ time?
When we started operating in 1999, we had a hardware share of 67% and now that figure’s 42%. I feel sure the share of hardware in our total sales will keep on falling.
Annette Becker, Börsen-Zeitung, June 12, 2015
About Eckard Heidloff
Always looking down the road
Eckard Heidloff, the President and CEO of Wincor Nixdorf, is not someone who seeks the limelight. So you could almost pity the 58-year-old manager at the moment, given that the MDax-listed company he heads has been making big headlines since April. Sometimes it’s speculation about acquisitions or a takeover that make the stock price fluctuate, other times it’s a whopping profit warning in the wake of large-scale restructuring.
Yet all that doesn’t seem to trouble Heidloff. He observes what happens on the stock market calmly, level-headedly and sometimes also with amazement – and in his opinion what he says can’t influence what happens there anyhow. “I’ve given up predicting how the market will react,” he said three years ago. At the time, Nixdorf had launched its first restructuring program to equip itself against the continuing decline in prices in hardware business.
However, that only gave the company temporary breathing space. “When you miss the boat, you have to take the next one,” says Heidloff, referring to the second program, and adds: “What counts is that you get to where you want to go to.” Admitting failings and yet looking down the road in order to identify future opportunities – that’s the hallmark of Heidloff and, ultimately, is probably why he has the backing of the workforce.
Heidloff, has been with Nixdorf for more than 30 years, during which time he has experienced changing market trends and different owners. He began his career in 1983 at Nixdorf Computer AG, which was integrated eleven years later in the Siemens Group as Nixdorf Informationssysteme AG. As part of that, Heidloff rose to the position of Commercial Director for business with banks and retail. 1998 then saw the carveout, which the manager was in charge of organizing. With KKR as new investor, the company was floated in 2004 – a process Heidloff accompanied as Chief Financial Officer. In January 2007, he succeeded his colleague of many years, Karl-Heinz Stiller, as President and CEO.