Barnes bullish on alarm industry

Thursday, February 16, 2006

PALM BEACH, Fla.--Leading off day two of the 11th Annual Barnes, Buchanan & Mallon Conference, industry analyst Michael Barnes painted a rosy picture of the 2005 alarm industry, and predicted a "frothy market" for 2006, but did note some troubling indicators and injurious trends to watch.
In terms of sales, Barnes said residential market revenue is growing consistently at eight percent, a trend that began in 1997. Commercially, revenues may be up as much at 13 percent, though Barnes said he'd "take that with a grain of salt." However, unit sales are down and flat respectively. What's driving revenues up is the size of the installations; people are buying bigger systems, which results in more revenue per install.
"This explains why you hear the manufacturers talking about 2005 being a great year," said Barnes. "What's happening is that they're moving more equipment but it's going to the same amount of customers."
Should the number of residential installations continue to be flat or drop in 2006, Barnes said, investors might sour on the residential market and financing for acquisitions might get harder to come by.
Still, because of better industry performance in retaining customers, total recurring monthly revenue continued to grow anywhere from six to 13 percent, depending on the source of the information. Add that, Barnes said, with a low penetration rate of about 18 percent of residential homes with security systems, increasing regulatory activity especially in the fire realm and the increasing level of sophistication among dealers. The result? "We're fundamentally bullish on industry growth."

For more on Barnes' annual presentation and the Barnes, Buchanan & Mallon Conference as a whole, see the April issue of Security Systems News.