Kessler keen on ADT reorg plan

Longtime industry analyst says split bodes well for both organizations
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Tuesday, May 18, 2010

NEW YORK—Part of Imperial Capital managing director Jeff Kessler’s job for more than two decades has been keeping an eye on ADT and Broadview. From Kessler’s point of view, there’s nothing not to like in ADT’s decision, announced yesterday, to reorganize into two separate businesses: one focused on commercial and one focused on residential and small business.

It’s a natural next step for ADT, and one that likely bodes well for both ADT businesses and ADT’s product pipeline. Kessler’s keen on the personnel decisions announced yesterday, and the fact that the reorg will provide more transparency—for industry watchers and analysts alike—to continue to keep close tabs on the security industry’s largest player.

“I think it’s well thought out: Running ADT North America Commercial and a much larger ADT residential is too much for one guy to do. No matter what you think of John Koch [who formerly ran all of ADT North America and will now serve as president of the resi and small business organization]. I think the world of this guy, but it’s too big a project for one person to do.”

The separation will allow the commercial business to really focus on what it wants to do in terms of installation and integration business. He also likes the idea of John Kenning, newly named president of ADT North America Commercial, running the commercial business “A guy from the telco business who created a global infrastructure and knows IT is the right choice,” Kessler said. “That’s where commercial is going.”

The new reorganization may grease the wheels of the product pipeline. Noting that a lot of security technology is developed for commercial applications and eventually is adapted at a lower price point for residential and small business applications, he said allowing commercial “to do its own thing and develop its own products can accelerate the process and allow the resi and small business to ultimately benefit from what’s going on in the commercial.”

Kessler said the fact that Koch has tapped three “key people from the operations side” of Broadview’s executive ranks (Shawn Lucht, Carole Vanyo and Stacey Rapier) to round out his team of eight senior staffers adds credence to ADT’s stated intention to integrate the best capabilities of Broadview.

Time will tell, he noted, “how their roles develop—if they’re given real power inside ADT over time, or if they get frustrated because ADT is a much different animal than Broadview.”

For outsiders who like to watch and analyze what’s going on inside ADT, the new organizational structure should provide more transparency, Kessler surmised.

With ADT commercial and residential as one big entity it was always difficult for analysts—even those who know the company very well—to discern certain metrics and “the minutiae of the business.” Kessler said he assumes that the two organizations will “likely report the businesses separately ... and they’re going to have to get more granular in the discussion of what the residential and commercial businesses are doing.”