‘It Was High-Tech or Bust,’ Concedes Chairman : Automated Teller Repairs Give AIDCO Shot in the Arm

AIDCO considers itself a high-tech specialist, concentrating on the growing business of repairing and installing sophisticated electronic equipment used by California banks and retailers.

But, until less than two years ago, the North Hollywood-based company’s bread and butter came from a low-tech enterprise: It simply cut holes in bank walls for automated teller machines.

AIDCO, more formally known as Allied-Interstate Development Corp., did fairly well at first with saws and shovels. But, by the early 1980s, many banks already had installed their automated teller machines, and the company’s business tailed off.

Founder Sold Firm

In fact, business got so slow that William Bundy, who founded the company in 1971, jumped ship last year. He sold AIDCO to four top staffers--Greg Eastman, Patrick Gorrell and Wayne and Patti Christensen--and moved to Oregon, where he now deals in real estate.

To diversify and grow, the new management got into repairing automated teller machines shortly after Bundy left, setting up a statewide network that now includes 60 trucks on call seven days a week from North Hollywood and San Leandro, just south of Oakland.

AIDCO also started repairing and installing branch terminals, the equipment that tellers use to get information about customers’ accounts, and point-of-sale credit authorization terminals, which are used by stores to check credit cards.

The company recently expanded into the installation of fiber optics, hair-width wires that carry more than 20 times more data, hundreds of times faster than standard copper cable. AIDCO also is installing advanced automated teller machines linking several hundred financial institutions to 7-Eleven convenience stores .

“If we hadn’t gotten out of being a brick-and-mortar company, we wouldn’t be here today,” said Eastman, AIDCO’s chairman. “It was high-tech or bust.”

To continue the corporate overhaul, AIDCO in May hired a new president, Ed E. Caliendo, a former vice president with First Interstate Bank. Eastman is counting on Caliendo, who was in charge of ATM installation for First Interstate, to use his industry contacts to benefit AIDCO.

In many ways, Caliendo, the big-company man, personifies AIDCO’s transformation into a more sophisticated and tightly managed business. He dresses in dark bankers’ suits and white shirts, and eagerly displays a series of organizational charts for his company of just 70 employees. A former co-worker at First Interstate calls Caliendo a workaholic.

“Ed’s more structured than I am,” Bundy said. “I’m more of an entrepreneur. I’d say the company is managed better day-to-day than when I was there. I think it can become a bigger company now.”

Indeed, the privately held company’s sales had been “fairly stagnant” before the new management came in, Caliendo said. In the last fiscal year ended Oct. 31, sales increased 10% to $5 million, largely because of the automated teller machine service, he said. During this fiscal year, Caliendo predicted, sales will rise 26%.

He said the company has been profitable for years, but would not give figures.

Diversification has brought in a major new source of revenue. Repairs, which AIDCO started in mid-1984, now account for more than 55% of its business, Caliendo said. Construction brings in 17% of its revenue, down from 90% previously.

AIDCO is part of a young and growing industry competing for lucrative bank contracts. The company, which only operates in California, lists Wells Fargo and Crocker National as well as Caliendo’s old bank, First Interstate, among its clients.

Weekend, Night Service

Financial institutions are relying increasingly on companies like AIDCO to repair their equipment because manufacturers do not provide service on nights and weekends, said Irene Fernandez, an assistant vice president for automated teller machine operations at First Interstate in Los Angeles.

Automated teller machines have proliferated as the institutions look for them to attract customers, clear out crowded lobbies and cut labor costs.

Five years ago, there were fewer than 13,500 of the machines in the United States, said Spencer Nilson, a Santa Monica-based financial services consultant. By the end of last year there were 40,000. Now there are 50,000, he said.

Nevertheless, bankers say, many people dislike automated teller machines. According to the Electronic Funds Transfer Assn., a Washington trade group, only 38% of the 120 million bank machine cards in circulation are used regularly.

Glenn R. Carlson, vice president and manager for electronic services for First Interstate in Los Angeles, attributes that statistic partly to service problems.

Carlson said First Interstate’s machines were out of order 15% of the time five years ago. He said down-time is now only 5%, and that many locations are without service less than 1% of the time because they have two ATMs.

“We want our machines working,” he said. “If we inconvenience our customers too often, they’ll stop using them.”

AIDCO and its competitors bid among banks for contracts to maintain and repair the automated teller machines. A contract may call for the company to repair machines at individual branches or for a bank’s entire system.

About one-third of AIDCO’s service calls are to repair automated teller machines. Most of those calls come on weekends when the bank machine use is heaviest and when AIDCO’s rates are the highest. Because automated teller machines typically weigh about three tons, AIDCO repairs the machines on-site.

The other service calls are for branch terminals and credit authorization terminals.

Growth of Branches

Branch terminals are an outgrowth of the computer revolution and automated teller machines, connecting all of a bank’s information through a central data base. Credit authorization terminals are a faster alternative to the books from credit card companies that retailers use to spot stolen cards and customers with bad credit-card records.

Both kinds of terminals, smaller and lighter than automated teller machines, are replaced by AIDCO when they malfunction, and are repaired at the four AIDCO facilities in California. Aside from the North Hollywood and San Leandro offices, the company operates outlets in Fresno and San Diego.

“We see AIDCO as a courier,” said Rex Edmiston, a Wells Fargo vice president in San Francisco. “They get the broken terminal out of the location and replace it quickly, which is important to the vendor.”

Other companies operate similarly. Technical Support Systems of Ossining, N.Y., which employs 260 people and reported sales for its last fiscal year of $12 million, has four locations in the same California cities as AIDCO.

To some extent, AIDCO is expanding by taking advantage of increasingly sophisticated technology. For instance, because the company is familiar with state-of-the-art fiber optics, it recently got the job of installing one bank’s automated teller machine, which uses that technology, at California State University, Northridge.

Complex Links

The automated teller machines AIDCO installs at 7-Eleven stores also are more complex than the standard machines. They are linked to 325 financial institutions instead of just one.

AIDCO has installed 125 of the bank machines in 7-Eleven stores since July, and expects to have 375 more in place throughout California by June 1986, Eastman said.

Caliendo said the company’s biggest challenge will be changing from a small company to a big one. “We need to instill certain disciplines. . . .” he said. “We have to grow in an organized manner and never risk losing existing business. . . .

“I know, as a former banker, that customers don’t forgive easily.”