ADT set to 'go it alone'
BOCA RATON, Fla.—Tyco International shareholders voted Monday to approve splitting Tyco into three separate companies—one of them ADT, another a commercial fire and security business, and the third a flow control unit. ADT officials say they’re eager to see ADT become a stand-alone company, providing security and interactive services to residences and small businesses and focused on innovation and growth.
“It’s a very exciting time for us,” Naren Gursahaney, CEO of The ADT Corp., told Security Systems News. That independent, publicly traded company will be officially created later this month after the distribution of shares takes place.
“While I think ADT has performed very well as part of Tyco, and I think we’ve contributed to Tyco’s success and I think Tyco is very beneficial to us, I think I and my entire leadership team are very excited about this next chapter of ADT,” Gursahaney said.
Among ADT’s new initiatives is a pilot program with consumer electronics retailer Best Buy to sell ADT security systems at three of that company’s stores, he said.
The impending breakup of Switzerland-based Tyco has generated speculation in the industry that ADT, the largest player in the home security industry, might be acquired by another company, such as AT&T.
Asked by SSN about the possibility of an acquisition by AT&T or anyone else, Gursahaney said the company doesn’t comment on rumors. He said he was focused on ADT becoming “a great public company.”
He was more direct in an interview with Reuters. According to a Sept. 18 story from the news service, Gursahaney said, “We do intend to go it alone. We're going to be a stand-alone public company.”
He told SSN that Tyco’s ADT North America Residential and Small Business would become The ADT Corp.
The new Tyco Fire & Security will take on the commercial side of North American and international operations, both for security and fire, said Gursahaney, who formerly was president of Tyco Security Solutions.
And, as Tyco has announced previously, Flow Control will merge with Pentair Inc. and be renamed Pentair Ltd.
Tyco said the distribution of shares would take place on Sept. 28. That’s a Friday, so Gursahaney said that for The ADT Corp., “our first operating day as a new company will be Monday, Oct. 1.”
The company will be a Delaware corporation and Gursahaney said its headquarters will be here. “We come back and become a U.S.-domiciled company. We become a true American company,” he told SSN.
The following Monday, Oct. 8, ADT officials will get to ring the opening bell at the New York Stock Exchange, he said. Gursahaney said the ceremony is “to celebrate the creation of the new company and our listing [on the exchange]. We’ll be listed under the ticker symbol of ADT, so it should be easy to find us.”
He told SSN that the split will benefit The ADT Corp. “It really allows us to be a pure-play, focused residential and small-business security company,” Gursahaney said. “… I think we end up with a corporate structure, as well as a financial structure, that is better suited to support this kind of business and a set of strategies that are focused on one, how do we create value and maximize value for our shareholders, but two, how to really accelerate the growth of the business and become a more innovative company in this space.”
After separating from Tyco, ADT says it will have $3 billion in sales, which it said comprises one quarter of the $12.5 billion North American home security market and is seven times more in sales than ADT’s closest competitor. The company says it has more than 6 million customers in the United States and Canada, and nearly 16,000 employees in 200 locations.
Reuters reported that ADT showed $693 million in operating income in fiscal 2011, and that analysts estimate its market value ranges “from $8 billion to more than $11 billion, with the higher estimates taking into account a takeover premium.”
Gursahaney said ADT’s goals include strengthening its core business, but it plans also to “expand our leadership position in the market.”
He said ADT has “the strongest brand in the industry,” noting that it has been in the security industry for nearly 140 years, has about 4,000 direct sales staff, approximately 3,800 installation and service techs, and six wholly owned call centers and monitoring facilities in the United States and Canada.
He believes ADT’s core residential business can grow beyond its current 20 percent penetration in U.S. households. “We do believe that especially with some of our new interactive service offerings and home automation offerings with ADT Pulse, we have the opportunity to drive that penetration rate up,” Gursahaney said. ADT’s penetration rate could double to 40 percent, he told Reuters.
In addition, he told SSN, “We also see some opportunities with some of our adjacent markets, like small business. Small business has a better penetration rate for monitored security, but our market share is actually lower than what we have on the residential side. There are also some opportunities in the home health space, where we’ve got a good PERS platform, but we think there’s more we can do over time.”
The company does not have plans to expand its field offices, he said. “We have good coverage across the U.S. and Canada. … We’re going to continue to increase our density in some of the markets that may not have as much customer penetration, but I think we’re where we want to be. Down the road, we’ll look and see if we want to expand into other markets outside of North America,” Gursahaney said.
Will The ADT Corp. employ any different approaches to selling security? Gursahaney told SSN: “We do have some partnerships with major retailers and we’re running some pilots with them, and I think we’re going to have to see how those pilots play out.”
When asked if he could reveal the names of the retail stores where ADT is selling security systems at this point, Gursahaney said, “We do have a pilot with Best Buy right now. We’re in three of their stores.”
He added that “in many cases, we’re using those retail stores as the opportunity to generate leads and create appointments.”
He said that’s because “we still feel that security is an over-the-kitchen-table type of sale. I think you can sell people on the concept of security [in a retail setting] but we feel like each home is unique in some ways as to how the homeowner operates in that environment, and we want to make sure that the solutions we sell them really complement or support their lifestyle in that home.” So, he said, “that’s why we’re focusing on our sales reps out in the field and making sure we’re continuing to train them and educate them and give them the solutions they need to be successful.”
Will customers see any changes as of Oct. 1? “I hope they’ll see us bringing more innovation to the market, and being more aggressive in driving new solutions there,” Gursahaney said.
Lewis Long, VP of marketing for ADT, told SSN that employees are excited about ADT going independent. “There’s an energy in our company that I haven’t felt in the four years I’ve worked there,” he said.
He said employees are even “more engaged with delivering what the customer wants.”
He said the company is investing in a group that will focus on innovation and also in new marketing strategies, such as “making it easier for customers to shop ADT” online.
Long said that among initiatives the company is working on is making information about ADT solutions more accessible on its website, so that “if you’re in the learning phase and exploring what type of solutions work best for your home, you can use ADT as a resource.” For example, he said, customers or potential customers could learn about the crime rate in their neighborhoods from the website and ways to conserve energy.