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On the Editor's Desk

by: Martha Entwistle - Thursday, January 3, 2008

We just received word here at SSN HQ that Tim Whall has left his post as CEO/headman at HSM (A Stanley Works Company). National sales manager Tony Byerly has taken over the job, effective immediately. I'd link to the news, but there's apparently no official release yet. Guess they'll want to change this page. When Stanley paid big bucks for HSM not much more than a year ago, there was a lot of talk about how Whall's presence was part of the value there. As in these quotes: Sandra Jones, head of consultant group Sandra Jones & Co., said buying HSM is "like buying the Hope Diamond, a one of a kind thing, and so it becomes much more valuable ... You're better off paying a high multiple for a good company than less for a company built on smoke and mirrors." Jones singled out Tim Whall as one of the best executives in the industry. Les Gold, a lawyer with Mitchell, Siberberg & Knupp who brought Stanley and HSM together roughly a year ago, echoed Jones's praise of Whall: "He's just as good as they come." In an interview with Stanley Convergent Technologies Group head Brett Bontrager, I got this: "What we've wound up with is a world-class management team. What Tim [Whall, HSM COO] has put together is really exciting. The culture that they have for winning starts and ends with providing world-class service; everything else will fall in place. It's a culture we'd like to spread throughout our entire convergent security group ... They put their metrics in place and diligently manage to those metrics and they're based on service to the customer." Let's hope Stanley made quick work of spreading Whall's culture throughout the group, or that Byerly and his team have plenty of that culture in petri dishes in the storage closet. Anyone want to hazard a guess on where Whall winds up? He's been in the business a long time; seems like he'd be sticking around.
by: Martha Entwistle - Wednesday, January 2, 2008
Okay, so I'm watching the original Tom Cruise remake of Mission:Impossible, and it gets to that very famous scene where Cruise is hanging from the air conditioning duct and can't make the temperature go up, or make a sound or touch the floor or the security system goes off and he's toast. As he's doing this (catching his sweat drop along the way), he's logging into the single most important CIA computer mainframe (do they still call them that? Mainframes?) with the password that he got from the guy who normally mans that ultra-secure room (who's in the bathroom because they poisoned him just a little). This is all very exciting, but the whole time all I can think is: Jeez, how hard is it to link the security system to the computer network so that it knows that the network can't be accessed by a person who hasn't just keyed in the door? Of course, the movie was made in 1996, and Tom Cruise emails people through a little program that shows him a digitized post card with a digitized stamp, but it really doesn't seem like it should have been that difficult even back then. It really blows my mind how late IP communication came to security.
by: Martha Entwistle - Wednesday, January 2, 2008
In our January issue, you'll find an article about former HID/Assa Abloy boss-man Joe Grillo joining XceedID's board of directors. In the piece, he talks about looking around for other opportunities "focusing on the RFID space outside the security-and-lock industry." Well, here it is. Grillo has been named CEO of the newly enlarged Digital Angel, which just merged with Applied Digital Solutions and does lots of stuff with RFID and GPS tracking, including implanting chips in your dogs and making sure they never get lost. Or, to quote: Digital Angel's products are utilized around the world in such applications as pet identification using its patented, FDA-approved implantable microchip; livestock identification and tracking using visual and RFID ear tags; and GPS search and rescue beacons for use on aircraft, ships and boats, and by adventure enthusiasts. That doesn't sound like Grillo will be working much with the security installation channel, but maybe he'll bring more of the products into our arena. It's worth watching.
by: Martha Entwistle - Sunday, December 30, 2007
Wondering why analytics seem like such a good idea? See this story. The big question is whether alarm events can programmed to produce small electronic charges.

by: Martha Entwistle - Sunday, December 30, 2007
Here's another classic Christmas break-in story. Yet again, we have a homeowner working with an anonymous security company, and the incredibly incurious reporter doesn't bother to investigate further into this technology that allows the homeowner to view video cameras over the web. Ho hum, why bother reporting on the interesting part of the story? Especially when you can make awesome sentences like these: Treanor has changed his locks, deadbolts and installed motion lights around his home, however, these aren't not the only steps he's taking to protect himself. and Moreover, the cameras will allow him to view whatever the camera has record even if they get stolen. The second is particularly nice. Not only do we get a butchered past participle, but we also get subject-pronoun disagreement and confusion. Brilliant. People wonder why the evening news isn't taken seriously....

by: Martha Entwistle - Friday, December 28, 2007
It appears that our top newswire story from yesterday has caused some confusion. I don't think it's my fault. The story was about a top engineering firm, KCI Technologies, buying Risk Management Consultants and with it creating a new subsidiary, KCI Protection Technologies. Unfortunately, there's another Risk Management Consultants, run by Jim Emerick, which is based in Cokeysville, Maryland, and just two miles from KCI's Hunt Valley offices. Emerick reports being a bit surprised to hear he'd sold his business. He thought it was funny at first, the two companies having the same names, then he got a call from one of his biggest suppliers asking him if he still needed his line of credit. Yikes. So, to be clear: KCI bought Risk Management Consultants, Inc., a Delware firm founded in 1985 and run by John Fannin, that does mostly engineering and design work in the security marketplace. (Here's a release about it, if you don't believe me.) KCI Technologies DID NOT buy Risk Management Consultants, LLC, a Maryland firm that services and installs residential and commercial burglar alarm systems, access control systems, CCTV systems and UL-listed fire alarm systems. They also have monitoring through a partner central station, Alarm Watch, also of Hunt Valley. While we're talking about the non-purchased RMC of Maryland, I can also note that RMC was recognized in 2003 by the Carroll County States Attorney's Office with an "Outstanding Achievement Award" for work with victims of domestic violence, and this past year, for similar efforts, RMC was named Business of the Year by the Maryland Network Against Domestic Violence and took home the 28th Annual Governor's Crime Prevention Award. Congratulations to them on working toward a noble cause. Apparently, Risk Management Consultants is a pretty popular name for a business. Here's one in Florida. Here's one in the UK. Here's one that serves orthodontists. I'm sure there are others.
by: Martha Entwistle - Thursday, December 27, 2007
Okay, it's a couple days late for that, but when newspapers run their inevitable Christmas break-in stories, it's an opportunity for alarm companies to chime in about how alarm systems work best, how to price them, what to expect of your installation company, etc. If I owned an alarm company in Northwest North Carolina (that's the region the Winston-Salem Journal covers, according to the web site), I'd at least pen a letter to the editor noting that, hey, see how the guy with the alarm system didn't get robbed?, and offering the opinion that if more people got alarm systems BEFORE they got robbed, instead of directly afterward, they'd get more value out of them. Newspapers are desperate for letters to the editor, by the way. People never write them unless they were personally wronged by a story or they're a part of some coordinated campaign for a candidate or cause. It's just like how none of you ever posts a comment.

by: Martha Entwistle - Wednesday, December 26, 2007
I hope everyone had a nice Christmas yesterday. My kids certainly enjoyed themselves, and I managed not to get too bitter and guilt-ridden by the ridiculous waste and opulence that is the American Christmas season. Sorry, but growing up in suburbia can make you all self-loathing and stuff - try to ignore it.
Anyhoo, since I'm the only one in the office today, I'm collecting some fun items mildly security related. If you find yourself with similar amounts of time on your hands, you may enjoy them. Guiltly pleasures are still pleasures, no? • Like, what could be more fun than hip-hoppers getting nailed at airport security checkpoints? They're always good for a paragraph like this: Police said they found a semiautomatic handgun and ammunition in Robinson's carry-on bag. He told them he didn't know the weapon was there, Stacho said. Hey Yung Joc, maybe you should pack your own carry-on bag. Otherwise, you might find some grenades or plastic explosive in there next time. You never know when those sneaky weapons are going to weasel their way into to your luggage. Really, someone should come up with a weapon-repellant you can spray on your luggage or something. Bonus points if any of my readers actually knew who Yung Joc was. Extra bonus points if you own one of his albums. • Here's a holiday bonus for school children: "We're going to make you less safe!" Merry Christmas! I went to school in Vermont, so I'd kind of like it if they didn't do dumb stuff like this. It makes my resume look worse. • The shoplifting angle is very important to this story. • Wired may make fun of it, but a biometric garage door opener is probably good for the security industry. • Glad I don't live in Vietnam. Writing about security is probably subversive. • Seems like this law should be universally applied, country-wide. I'm tired of this copper theft business. Still, it remains a good sales tool for integrators looking to secure job sites and municipal areas in general. For example, if the city of Portland had had decent municipal surveillance, maybe we'd still have the lights on. Seriously, read that Portland story. How on God's green earth does 21,000 feet of copper wiring get stolen without anyone noticing? It's insane. Security starts with people not being mindless unobservant automatons. Now I'm in a bitter mood again, thinking about my fellow Mainers being such dupes. I better get back to work. This blog entry isn't turning out as fun as I thought it would.

by: Martha Entwistle - Friday, December 21, 2007
The acquisition team at Securitas Systems has been busy, that's for sure. Click on the Securitas Systems label below for the full story, but here they go again. This time, it's a buy in the Netherlands, Installerende Partners, and it's a relatively small one. However, not only did they announce their traditional 5-7x EBITDA range, they also supplied sales numbers: approximately MSEK 26 (MEUR 2.8). Must be nice making buys in MSEK instead of the rapidly falling dollar. Anyway, now I can try some math. Securitas Systems has said they look for businesses approaching 40 percent of gross revenues in service money, but that's unlikely to be the case with a small integrator with only 25 employees, so it's probably more like 25 percent in service. That's going to bring their gross margin down into the 20 percent range, no? (I'm trying out relatively newly acquired business-analysis knowledge here, so please correct me with the comment button below if I'm way off. Remember, I was an English major...) So, of their $4 million in 2006 revenues, that's $800,000 in gross margin. As a company 20 years in business, it probably doesn't have a lot of financing costs or undue overhead, so we'll back out maybe $100,000 of that and say they've got EBITDA of $500,000. Multiply that by six and you've got $3 million as a purchase price, which is .75x 2006 revenues. If they have 25 percent of revenues in service, that's $1 million annually, which is $83,333,333 in RMR. So $3 million as a purchase price would be 36x RMR. What do people think of that?


by: Martha Entwistle - Thursday, December 20, 2007
I'm not sure how this affects their security play, but when you consider the increasing overlap of security and building controls, this may have some crossover. Truncated release follows. Lots of big numbers (and capital letters, which I hate - stop shouting at me): INGERSOLL RAND TO ACQUIRE TRANE INC. FOR APPROXIMATELY $10.1 BILLION • Transaction Creates a Global Diversified Industrial Company with expected Pro Forma 2008 Revenues of  $17 Billion and $2 Billion of EBIT • Transaction Immediately Accretive to Earnings with Estimated 2008 EPS of $4.00 • Cost and Revenue Synergies are Expected to Exceed $300 million by 2010 • Acquisition Price for Trane of $36.50 Per Share in Cash and 0.23 shares of Ingersoll Rand Common Stock per each Trane • • Share Equal to Approximately $48.00 in Total Value per Trane Share Hamilton, Bermuda and Piscataway, New Jersey, December 17, 2007 – Ingersoll-Rand Company Limited (NYSE:IR) announced today that it has executed a definitive agreement to acquire Trane Inc. (NYSE:TT), formerly American Standard Companies Inc., in a transaction valued at approximately $10.1 billion, including transaction fees and the assumption of approximately $150 million of Trane net debt. Trane is a global leader in indoor climate control systems, services and solutions with expected 2007 revenues of $7.4 billion. Under the terms of the merger agreement, which has been approved by the Boards of Directors of both companies, Ingersoll Rand will acquire all outstanding common stock of Trane. Holders of Trane's approximately 200 million common shares will receive a combination of $36.50 in cash and 0.23 Ingersoll Rand shares of common stock per each Trane share. The total value for this transaction was $47.81 per Trane share based on the closing price as of December 14, 2007. The transaction which is expected to close late in the first quarter or early in the second quarter of 2008, is subject to approval by Trane shareholders, regulatory approvals and customary closing conditions. Herbert L. Henkel, Ingersoll Rand chairman, president and chief executive officer, said, "The combination of Ingersoll Rand and Trane will create a global, diversified industrial company with projected pro forma 2008 revenues of $17 billion. The new Ingersoll Rand portfolio will include an $11 billion Climate Control business which will offer high value equipment, systems and services necessary for delivering solutions across the temperature spectrum for indoor, stationary, and transport applications worldwide. "As a result of expected revenue and cost synergies, we are confident that this acquisition will improve Ingersoll Rand's future earnings growth potential. We believe the new Ingersoll Rand will be capable of sustaining annual organic revenue growth averaging 5-7% and EPS growth exceeding 15% per year, both in excess of our former growth guidance. In particular, assuming timely consummation of the proposed acquisition, we anticipate earnings of $4.00 per share in 2008." At the very least, this sounds like something that's going to make IR more profitable, and that could make them more aggressive in the security market in general. Could be less cash on hand for other security acquisitions, though.