PHILADELPHIA (AP) ¿ Shares of NCR Corp. and Diebold Inc. fell sharply on Monday after a Baird analyst downgraded both ATM makers in light of expected weakness in bank spending on these machines for the next several quarters.

Reik Read cut his rating of both companies to "Neutral" from "Outperform." The ratings reflect his expectations of how the stock will perform relative to the market over the next 12 months, whether it will stay in line or outperform broader indices.

Read based his expectations on a survey of 13 banks with 55,000 installed ATMs, which showed first quarter weakness as banks focus on other technology needs such as their data centers and software. Growth in spending on ATMs this year is expected to shrink.

Diebold's weakness comes from its exposure to U.S. regional banks, where it commands about two-thirds of the market. Regional banks make up 20 percent of Diebold's revenue.

"Regional banks continue to delay upgrades and new installs," Read wrote in his research report. "We expect weakness will likely impact the next several quarters.

The departure of Kevin Krakora, Diebold's chief financial officer, also hurts the company since he was good at generating cash and raising margins from improvements in operations, Read said.

Last Wednesday, Krakora received a regulatory notice probing his role and that of others in Diebold's decision to restate financial statements.

Read cut his 2009 earnings estimate to $2.06 per share from $2.10, and his 2010 estimate to $2.28 from $2.30.

In NCR's case, the company will be hit more from European bank ATM weakness and business from U.S. retailers. Read also noted that the stock is up 50 percent over the last three weeks and he sees near-term challenges to NCR that could weaken the shares.

ATM revenue "appears to be weakening somewhat" in the U.K., which is NCR's biggest market, the analyst said. Retailers also are more hesitant about buying new equipment, focusing on fixing those they already have.

Read noted NCR is doing another round of job cuts, but expects that the full impact of savings won't come until the second half of 2009.

He cut his 2009 earnings estimate on NCR to 84 cents from 86 cents, and 2010 estimate to $1.05 from $1.19.

Shares of North Canton, Ohio-based Diebold fell $1.82, or 8 percent, to $20.84 in morning trading, while NCR, headquartered in Dayton, Ohio, shed $1.51, or nearly 16 percent, to $8.11.

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