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A wrinkle in the CIT story

Monday, July 27, 2009
So, I got a nice email from reader Marty Mayo this morning alerting me to CIT's past connections with Tyco and the infamous Dennis Kozlowski. It was before my time, but in March of 2001, Tyco announced its intention to buy CIT for $9.2 billion, saying this:
"For years, our operating managers have advocated creating a financing capability within Tyco to support the growth of our businesses," said L. Dennis Kozlowski, Tyco's Chairman and Chief Executive Officer. "After evaluating several paths to this goal, including developing a financing capability in-house, we concluded that acquiring CIT gives us a faster, more efficient and more robust solution at lower risk than anything we might have done internally or through joint-venture or other approaches. Putting in place a fully established leader in the commercial finance industry is the ideal platform for us to fulfill this need.
I guess that made sense at the time. But it was apparently a move made at the height of Kozlowski's hubris. Just a year later, Tyco was getting permission to sell CIT to the public via IPO, hoping to get just $5 billion back. Nice return on that investment:
Tyco also said it would take a noncash loss of about $6 billion as part of the offering. It will take most of the loss by restating its earnings for the quarter ended March 31 down by $4.5 billion, and the remainder after the deal is finished. The loss represents the difference between the value of CIT on Tyco's books and the amount that outside investors are willing to pay for it. Tyco values CIT at $11.3 billion, so if the company sells CIT for $5 billion, for example, it will have a loss of $6.3 billion.
Looking into this also brings to mind how short our memories can be in general. Take a look at this article about CIT, post-Tyco. It's just seven years ago, but at the time here were the concerns:
The problem CIT faces is that it's still a difficult business environment and companies it lent money to are struggling to pay their bills. Even though delinquency rate on loans in CIT's portfolio fell to 3.74% from 4.09% at the end of March, the company's executives say it's too soon to declare an end to the corporate credit problems.
Corporate credit problems? 2002 didn't know corporate credit problems. In fact, can anyone remember the corporate credit problems of 2002 in the context of the past year's credit disaster? These things can clear up quicker than we think. To get back to Marty's email, does the Tyco-CIT connection have anything to do with the company current problems? Doubtful. Does it have anything to do with CIT's former work with the alarm industry? Not really - though maybe their association with Tyco turned them on to the recurring revenue nature of the alarm business and it was part of what made them look more closely at the industry four or five years ago. Regardless, it's always interesting to see the hands of Dennis Kozlowski still touching pieces of the business world.

These guys are full of hot air

Friday, July 24, 2009
I've been writing a fair amount lately on security companies that are productizing (nice verb, right?) solutions that they find themselves putting together on a regular basis for similar clients. Like these guys. And these guys. But brand-new ideas are fun, too, and it's hard not to like the flySWAT, a helium balloon with a camera attached to the bottom. They're not the first to have the idea, certainly. Here's a different version advertising a $1 million camera attached (which hardly seems possible, or smart, for that matter). But cCubed have clearly used their heads to come up with something that has a clear application.

Tired of waiting for HDCCTV?

Thursday, July 23, 2009
Well, these guys are selling HDCCTV DVRs and cameras right now. I'll be talking with them further in the near future, but for the time being, everything seems legit. The company is SG-Digital, a shortened version of the Security Guys, a distributor with whom some of you may have worked. They used to sell Kodicom, but Kodicom has gone primarily OEM, apparently. I'll have more in a story for the site next week.

The latest blog on the market

Thursday, July 23, 2009
I've added a new blog to the roll on the bottom right. ObjectVideo's got a new one, which, as you might expect, will talk about video analytics, standards, government initiatives, etc. Right now there's a sum total of two posts, the latest one from the first week of June, so I wouldn't get too excited. But it's another RSS feed to add to the Google reader, anyway.

Even more great press (though not for IP)

Wednesday, July 22, 2009
For whatever reason, there's been a run lately of local media basically telling home and business owners they'd be morons not to invest in a security system. This seems like a good thing to me. Reporters, as a whole, are generally skeptical of anything that makes anyone else money (we're petty that way because most of us are so poor (if you want to be rich, do not, under any circumstances, go into journalism. Not all of us can be high-powered security-industry-periodical editors)). So, if they're saying you should buy a security system, the reader understands that, yes, the security company is making money on the deal, but the return to the customer is well worth it. What better viral marketing is there than that? Anyway, the newest example is from Salida, Colorado, a place I expect is fairly beautiful and beatific, but has apparently been troubled by break-ins lately. Police chief Terry Clark gave the security industry a ringing endorsement:
Clark said he's surprised more businesses are not using alarms and surveillance equipment. "If there is one thing a person could do it would be to install an alarm or video system," Clark said.
Can we get this guy on a national tour or something? Shouldn't one of you big alarm companies give this guy a medal and put him in an ad? Maybe this guy Joe will buy him a beer.
At Knight Security Services in Salida, owner Joe Ellsworth said he's done a few more bids lately and people calling about security systems, but "it hasn't been as drastic as you'd think." [That sentence is sic.] After the June burglaries, Ellsworth said one restaurant that was robbed called him to install a system. "I think there is still a notion, and I think it's true, that we live in a safe town," Ellsworth said.
Note to security guys: Maybe admitting you live in a safe town is not good for business. Just saying...
His business offers security and surveillance systems ranging in cost from $500 to $3,000. "For a typical business in downtown, for a really good system, is about $2,000," Ellsworth said. A popular item is a monitored security system that, once triggered by an intruder, automatically calls authorities.
Ellsworth also may want to rethink his pricing. A "really good" system for $2,000? I guess I can see intrusion-plus-DVR-plus-analog for $2,000, but he knows the market better than me, obviously. I'm guessing Salida is not a sprawling metropolis.
Monitoring for those systems costs $30-$35 a month, he said.
Again, seems like that's pretty cheap for a commercial account. But here's the kicker for the IP proponents:
A surveillance system typically uses analog cameras to capture images which are converted to digital recording machines, Ellsworth said.
This is the sentence that IP camera makers will ultimately have to wipe from the international lexicon: "A surveillance system typically uses analog cameras to capture images." That would make IP cameras "a-typical." Again, just saying...

Another way to cut you out of the deal

Wednesday, July 22, 2009
DIY home surveillance systems are getting ever more sophisticated, and the manufacturers are starting to figure out the recurring revenue part, too. Here's a new product called the AVC LiveLine. Basically, it's triggered on motion, sends you an email when the motion happens, and you can dial into it at any time to see what's going on with the ability to PTZ and whatnot. But, you've got to pay $9.99 a month for that functionality. Why? That's hard to figure, actually. I guess you get to use proprietary software. If enough people sign up, it seems like a cash cow to me. There aren't any operators to pay, just software to support. I still say that the majority of consumers will want a central station who can dispatch involved, as seeing there's a burglar in your house doesn't do you a lot of good unless you can actually do something about it and most people don't have the cops on speed-dial. But as a nanny-cam, this isn't a bad solution.

This is great press

Tuesday, July 21, 2009
I'd encourage every security company to offer up a story like this one to the local TV stations. Great publicity: Second edit: Weird. KFSY took down the link to the story. Well, anyway, there was a story here that said most alarm companies can respond to an alarm in 15 seconds or so. Very positive, info-mercial like story for the alarm biz, though Mike Jagger thinks it creates unrealistic expectations that will be harmful in the long run (see comments) EDIT: Jeepers, and while I'm at it, check out this story from a local Altoona paper. It could have been written by Merlin Gilbeau, himself. Apparently, alarm business is booming!

CIT update

Tuesday, July 21, 2009
This Bloomberg article gives you just about all you need on where CIT is right now (as in: not a good place). There's some financial mumbo-jumbo, but the bottom line seems to be that CIT is on the brink of bankruptcy, and even the reported $3 billion lifeline it's worked out with its bondholders might not be enough to save the company. Here are some choice lines that underscore why this is a big deal:
The cash shortage has forced CIT to cut back its lending. In the quarter ended June, CIT’s loans to small businesses plunged 88 percent to $65.7 million and the company fell to 15th in the category from first a year earlier, according to the La Canada, California-based Coleman Report. CIT finances about 1 million businesses from Dunkin’ Brands Inc. to Eddie Bauer Holdings Inc.
There are already a small number of lenders who "get" security. CIT was one of them. Now it seems they won't be one of them going forward.
CIT has said a bankruptcy would put 760 manufacturing clients at risk of failure and “precipitate a crisis” for as many as 300,000 retailers, according to internal documents.
The retail market is already terrible, though a large one for security companies. This could have a further negative impact on that market sector, meaning there won't be a whole lot of new surveillance systems going in. Of course, this credit collapse is bad for the economy as a whole, but the security industry stands to be impacted considerably by a CIT collapse.

Evidence of the new economy

Tuesday, July 21, 2009
If you think you're living in the same world you were living in five years ago, you're the mayor of Wrongtown. Check this out: A software company is bringing in $2,000 a day for an iPhone app that literally, and by their own admission, does nothing. People download this app for free, see their own reflection in their own screen (something that happens when their phone is actually off, for that matter) and then, for what reason no one knows, click on the ads that appear accompanying the "mirror." So, $2,000 a day flows into the company's coffers, for the time being. The fad might last a week, might last a day, might last a month. Regardless, the company is bringing in revenue by selling nothing (or, rather, by giving nothing away). Who says there's no opportunity in this economy?

Good news for resi security

Monday, July 20, 2009
It may not be time for you resi dealers to pop the champagne, but at least some of the numbers are moving in the right direction. From WSJ's Marketwatch last week, here's some news about housing starts:
WASHINGTON (MarketWatch) - New construction of U.S. houses expanded for the second straight month in June after hitting a record low in April, the Commerce Department estimated Friday. Starts rose 3.6% in June to a seasonally adjusted 582,000 annualized units stronger than the 531,000 pace expected by economists surveyed by MarketWatch. This is the highest level of starts since last November. Starts of new single-family homes rose by 14.4% to 470,000 in June, while starts of large apartment units fell 29.4% to 101,000. Building permits, a leading indicator of housing construction, rose 8.7% to a seasonally adjusted annual rate of 563,000. This is the highest level of permits since December.