Tyco Incorporation is allowing and implementing the split up of ADT into 3 business identities. The question I have, are they splitting ADT to sell the separated units to other companies like themselves, or? I say we been bought, or on the edge of being bought, what say you?
Great question. I have postulated that ADT as a publicly held company will not survive. Despite its "rich" 130+ year history, ADT has never been able to survive as a self standing entity, much less a publicly held one. It has always run a muck financially, gotten into some kind of legal trouble, or been a wholly owned subsidiary of some global multinational corporation.
ReplyDeleteADT's primary revenue source is subscription fees generated by its monitoring services. These fees tend to be anywhere from 50-100% more expensive than local market providers in a decidedly "deregulated" industry. Aside from the name, and a marketing platform, ADT offers little else in a commodity driven service based industry that your local central monitoring station and a little low voltage electrical know-how can provide at a substantially lower price, particularly in the residential and small business sectors. The video surveillance products they offer are high quality, but hopelessly overpriced, as are their intercom and access control products. The marketing gimick management would have you try to buy into is the "consultative approach" to protecting your business and making it more profitable by applying ADT's services and products. The problem is, all the services and products ADT offers, someone else offers at a lower price as well. Dressing up your business or home for protection and surveillance at this level does not require PhD level thought processes. Your typically business or homeowner could self educate themselves and do the same job for a quarter of the price more often than not.
If I'm underwriting the IPO on this public offering, I'm having a hard time finding the long term value and growth in a subscription based business where the technology base is dated, readily available, and becoming cheaper everyday. Makes me wonder about the possibility of an unknown buyer as well, particularly with regard to the small business and residential pieces of the existing company.
ADT's (Small Business and Residential) business model and profitability is based on subscription income in the form of monitoring fees. The technology that supports these fees are low voltage, aged, patent-less systems that anyone with a little know how and time on their hands could install themselves at a fraction of ADT's cost. As I've been told, the door contact, keypad, and the motion detector have not changed much in the last 10 years. The income derived by ADT's monitoring fees are probably 50-100% higher than local central monitoring stations rates, begging the question: If there is no physical product separation between the local guy and ADT, where is the value, both for the customer and the investor? And should ADT even consider going public?
ReplyDeleteMy understanding is ADT makes little money on installations, and despite that, their CCTV and Access Control products are hopelessly overpriced by factors of 2-4x's. The installation crews are unionized. The cost structure for the company is high, with a fair bit of middle management. Salesforce turnover is somewhere between 70-80%... If I'm underwriting this IPO, I have to ask, where is the long term growth here? The market is deregulated, anyone with a low voltage license can install these systems and sell the monitoring at a cost of 7-10.00/month and reap the profit over that amount.
Historically, and despite its 130+ history, ADT has always either been owned by a multinational, struggling, or under some type of legal duress. I don't see I stock here that I would invest in.
Blog-master: You dashed my hopes in my last two attempts at posting this, I'll try one last time.
ReplyDeleteADT going public is risky business for potential stock holders of the IPO. Here are the reasons why:
1) Historically ADT has not done well as a publicly held company. 140 years later, it has never really successfully stood on its own without running into legal or financial problems. Check out the history. It only seems to survive relatively well under the safety net of a multinational technology company or in its infancy dating back to the late 1800's or early 1900's.
2) The IPO (Initial Public Offering) market for subscription income based companies is weak right now. Most of ADT's income is from the the subscription based monitoring payments its customers pay. Netflix is a perfect example of the failure of subscription based systems that rely on lower end technology...
3) Companies with a strong unionized labor force are blights in the IPO market. I have no bias against the installation staff that I've worked with, but from an expense/cost standpoint, it works against a successful IPO underwriting. Having said that, TYCO and ADT have earned their issues with the abuse of their own labor force, so its a good thing that unions are in place to protect the workers.
4) Its a deregulated industry. Most electricians can buy all the same equipment we install, at lower prices, and sell the monitoring to local third party monitoring companies at half the cost. There are no barriers to entry.
The technology behind the security business is not cutting edge. While I think that ADT offers a solid product that is well marketed and well known, its a matter of paying more for the same thing everyone else can offer. Buyer's only will use ADT if they are willing to avoid the risk of the unknown with a local vendor.
ADT as an IPO seems like a long shot to me. My guess is they are sold to a company like Xfinity Home Security... check out their pricing for the equivalent of ADT's Pulse systems:
http://www.comcast.com/homesecurity/product_packages.htm
And for the record I'm an ADT guy... and it breaks my heart to see a bigger stronger company offering the same premier product at half the cost. Somebody in management needs to wake up at ADT.
The following site may spell it out that we are on the market to be sold.
ReplyDeletehttp://epaper.ardemgaz.com/WebChannel/ShowStory.asp?Path=ArDemocrat/2011/09/20&ID=Ar02103
Wow, that article specifically referenced Comcast and Stanley as potential candidates to buy ADT. I had not seen that.
DeleteIts funny b/c I suspect that the cost of ADT's unionized labor force on the tech side is what is holding it back from a profitability standpoint. I wonder if the sale of the company could free the buyer up from some of these costs.
Those of you who have mentioned the unionized workforce are misrepresenting the facts. Only a small percentage of the country utilizes union technicians. Mostly major urban areas such as the immediate NYC area, parts of NJ, Chicago, LA. In these areas, you cannot do new construction business or even work in many existing buildings without being in a union. Most of the country utilizes a non-union workforce. Please post facts instead of generalizing.
ReplyDeleteAnd for the rest of you disgruntled employees trashing the company and their pricing policies - please resign if it's so bad. Unlike the mom & pop outfits that you're referring to who can fold up at any time and subscribe to generic central station outfits, this company has a large infrastructure, redundant central stations, a strong support network and a footprint across the entire country. These things cost money. While it may not be perfect(and what company is?), it is fundamentally sound, secure, fair and reliable. We would not have the client list that we do if we were as bad as you claim.
You sound like a bunch of disgruntled underachievers with an entitlement attitude. I have been here 22 years and have not been abused or mistreated. I was hired as a technician, formed a good reputation, became a manager and now am in a respected support position. It simply took a good attitude and a better than mediocre work ethic. Please quit if it's so bad - the company doesn't need people like you.
After 23 years I did quit. They treat their employees like children and for their customers they would rather fix a Wendys door contact than a fire alarm. You are a brain-washed dork.
Deletemust be protected by the union.
DeleteWith the changes that have been implemented in the last year (changes to the allowable discount, iPads for the sales staff and the sales force program) I do believe that ADT is being put in a position to be sold. I'll explain:
ReplyDelete1. As of Oct 1, ADT is it's own company. No longer having any part of Tyco, yet we are still operating out of the same offices. That tells me that ADT as a company has no real inkling to get offices for the staff. It seems more likely that they will sublet warehouse space from the Tyco offices and go paperless so they can say good-bye to the admin staff of most of the offices and get rid of the offices altogether, hence the iPads and SalesForce.
2. The IPO offering is a bet being hedged to pay off Tyco's debts. Without a doubt, ADT was saddled with much of Tyco's debt and is hoping to pay it off from the IPO. If it works, fantasic. If it does not, Tyco is still off scott free and the downside would be ADT losing money and the stock dropping considerably. Once it reaches a certain point, it would be prime to be picked up by a buyer.
3. The major competitors to ADT aren't the mom and pop shops, or the dealers. It's the companies like Comcast that people call before ever calling ADT. When you move into a house, there are 2 places you call before anything else: Utilites, and phone/cable/internet service. As a result, Comcast is eating up more business than ADT can count b/c you can't weigh the stats of a lead you never got in the first place. They are whittling away the marketshare and making it impossible to maintain the IPO's initial price. Again, this will make ADT positioned to be sold of taken over.
4. The bulk majority of ADT's income comes not from the offices and reps (they cost money too) but from the ADT dealers. I have never heard of a single business changing hands and becoming better for the employee. That being said, ADT as a brand has weight behind it. But most people have no idea the difference between ADT and an ADT Authorized Dealer. There is the potential that if someone was to buy ADT, they would no longer wish to have offices at all. Would no longer wish to carry the benefits and pensions for so many people. Would no longer want the ridiculously over managed Sales/Admin/Install combo. Telemar would be kept, the monitoring stations would be kept, Service would be kept (but satellite, working from home and going to the warehouse for parts only, keeping their own inventory)but just continue to utilize the dealers for all new sales as they are no muss, no fuss.
It could happen.
Turns out you had it backwards. Its Tyco that's going away.
DeleteWith the changes that have been implemented in the last year (changes to the allowable discount, iPads for the sales staff and the sales force program) I do believe that ADT is being put in a position to be sold. I'll explain:
ReplyDelete1. As of Oct 1, ADT is it's own company. No longer having any part of Tyco, yet we are still operating out of the same offices. That tells me that ADT as a company has no real inkling to get offices for the staff. It seems more likely that they will sublet warehouse space from the Tyco offices and go paperless so they can say good-bye to the admin staff of most of the offices and get rid of the offices altogether, hence the iPads and SalesForce.
2. The IPO offering is a bet being hedged to pay off Tyco's debts. Without a doubt, ADT was saddled with much of Tyco's debt and is hoping to pay it off from the IPO. If it works, fantasic. If it does not, Tyco is still off scott free and the downside would be ADT losing money and the stock dropping considerably. Once it reaches a certain point, it would be prime to be picked up by a buyer.
3. The major competitors to ADT aren't the mom and pop shops, or the dealers. It's the companies like Comcast that people call before ever calling ADT. When you move into a house, there are 2 places you call before anything else: Utilites, and phone/cable/internet service. As a result, Comcast is eating up more business than ADT can count b/c you can't weigh the stats of a lead you never got in the first place. They are whittling away the marketshare and making it impossible to maintain the IPO's initial price. Again, this will make ADT positioned to be sold of taken over.
4. The bulk majority of ADT's income comes not from the offices and reps (they cost money too) but from the ADT dealers. I have never heard of a single business changing hands and becoming better for the employee. That being said, ADT as a brand has weight behind it. But most people have no idea the difference between ADT and an ADT Authorized Dealer. There is the potential that if someone was to buy ADT, they would no longer wish to have offices at all. Would no longer wish to carry the benefits and pensions for so many people. Would no longer want the ridiculously over managed Sales/Admin/Install combo. Telemar would be kept, the monitoring stations would be kept, Service would be kept (but satellite, working from home and going to the warehouse for parts only, keeping their own inventory)but just continue to utilize the dealers for all new sales as they are no muss, no fuss.
It could happen.