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Sam is laid up and Axsys is cheap

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Monday, March 16, 2009
If I'm not getting back to you right away or posting anything of value recently, it's because I have wicked case of something like the flu, thanks, of course, to my children (whom I love dearly). This sickness has nothing to do with going out on the town Friday night. That is a nasty rumor. I'm not sure how these things get started. One thing of interest I'll hopefully have for the newswire on Thurs.: Axsys is ready to get out of the surveillance market. And one guy thinks a defense contractor will buy them. And this other Fool thinks Flir's gonna buy them. This is one of those things that can only be happening in this economy, where everyone's crazy. It's not like the company is in the tank. Their most recent financials are pretty awesome, really. I think most companies would be alright with a greater-than-10-percent net margin and sales growing at 34 percent. But, because people are irrational (and because hedge funds do 25 percent of all trading and people are freaking out and calling in their cash), Axsys' stock is down by half. So, that makes them rather attractive to buy. Hence the overtures. Now, who are Axsys (other than Axis' homonymic nemesis)? Well, they do pretty high-end stuff. Their cameras aren't cheap and aren't on the mass market. I can see why Flir would want some of their infrared technologies and, more specifically, accounts. Now, nothing may happen. But if the offer is well over where the stock is (irrationally) trading, the board is going to have to accept it.

Shareholders approve Tyco move

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Thursday, March 12, 2009
The shareholders said yes yesterday to Tyco International, parent company of ADT and SimplexGrinnell, regarding a relo. Pending some government filings, Tyco International's "home" will no longer be Pembroke, Bermuda, but rather the canton of Schaffhausen Switzerland. Here's the Tyco press release.

It's time to renew your CSAA Five Diamond certification

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Thursday, March 12, 2009
The CSAA wants you to know that it's almost time to renew your Five Diamond designation. If you're a Five Diamond central station, that is. If you're not, then you don't need to worry. But seriously, if you are a central station that isn't Five Diamond certified, it might be something to consider. The CSAA and the online training administrator CMOOR Group make the training fun and engaging (I enjoyed it, anyway, and now have a really cool looking certificate that I'm going to frame and hang somewhere in my cube), and it will move your central station into the elite top percent of certified centrals out there. The renewal date for Five Diamond certification is April 30, 2009. Information on how to renew as well as a download of the renewal form can be found here. The form must be signed by a company officer, notarized (except for Canadian centrals), and accompanied by a copy of your 2009 UL Listing certificate or FM Approval good through 2010, as well as the completion certificates (printed from the online course) of any new operators hired since the initial certification. The CSAA will also be sending out renewal packets in the mail, so keep your eyes open. Further questions can be directed to Becky Lane at 703-242-4670 ext. 18.

OzVision teams with CMOOR Group to provide online training

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Thursday, March 12, 2009
I had a chance to speak with OzVision founder and president of security Avi Lupo and CMOOR Group president Connie Moorehead recently. They wanted to talk to me about an exciting new feature being offered through the CMOOR Group at the OzVision website. Regular readers of SSN will recall the CMOOR Group from a story I wrote back in Dec. '08 on the online training offered by the CSAA forcentral station operators. The new training modules, which are currently under development will be available for perusal here. According to Lupo, since OzVision is an embedded part of the platforms used by many 3rd party monitoring centers, such as Guardian and Rapid Response that do video monitoring, the training modules needed to cover three areas: Sales, technical, and operations. An excerpt from the original release follows.
The first course will be focused on sales and the features and benefits of the OzVision suite of products. The second course is a technical course geared towards the installation and technical features of the product and the third course in the series will be an operations course designed around user features, operations and function of the OzVision product. OzVision has partnered with The CMOOR Group to develop this online training series. CMOOR is widely known throughout the security industry as being the premier custom content and media development solution provider to trade associations, manufacturers, integrators and dealers. Built with the latest technology, these courses are highly interactive and engaging for the students. Each student is provided a certificate of completion at the end of the course and continuing education credits will also awarded to participating students upon successful completion of the training. Each courses is anticipated to be approximately 60 minutes in length. To pre-order your training, contact The CMOOR Group at 502-254-1590. The course is $50 per student and volume discounts are available.
Online training is obviously pretty cool, and the fact that students will get continuing education credits is a major plus. I've received my official certificate for passing the Central Station Operators Online Training Level I and have completed the educational modules for the CSAA Advanced Operator Online Training Course... Unfortunately, true to the modus operandi I adopted in college, I've waited a little too long to start the test at the end now, and am really nervous that I might need a serious cramming session to review all the notes I took before submitting to the assessment. Good luck to all future online students.

One of these things doesn't look like the other

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Wednesday, March 11, 2009
I've written before how much I dislike projections. Mostly because they're always wrong. And especially in this economy, I'm dubious of any revenue projections. No one (well, mostly no one) saw this huge downturn coming, no one really knows how long it will last, and no one really knows which sectors will be hit for how long. So there's that. But here's another reason I dislike projections: They very rarely take into account anyone else's predictions. Let's look at a couple of predictions that have been put out there this week: 1. IMS says spend on video analytics might reach $140 million by 2012. 2. Steve Hunt says spend on PSIM software will reach $3 billion to $4 billion annually by 2012. How does that old Sesame Street song go? One of these things doesn't look like the other? Let's take the first. IMS says $50 million was spent on analytics in 2008 (which seems reasonable to me, though I'm always skeptical of such a round number). And they think that might get to $140 million by 2012. So, that's a $90 million increase in four years. It's a CAGR of 30 percent (sick of doing math? Use this handy online CAGR calculator). Now that's a pretty healthy growth rate. But the technology is still young, and the numbers are somewhat small, so percentages sometimes look big in those kinds of environments. For example, here's an article from the government about the geospatial industry growing at 35 percent annually, and 100 percent in the commercial subsector. Here's a nanotechnology company growing at 150 percent plus. Mostly these sorts of predictions are wrong. I don't think anyone believes the access and surveillance market grew 37 percent annually over the last three years. But they're sometimes right. I'd certainly buy that smart phones grew 44 percent year over year from 2006 to 2008. So, let's get to #2. Now, just the language of "$3 billion to $4 billion" gives me the willies. But let's start with this:
A top-down estimation of the potential PSIM spending would normally take total security spending and parse it out based on certain assumptions. For example, of the, say, $50bn annual spend on security products and installation services only a portion would be spent in organizations considered candidates for PSIM solutions, like corporate facilities, airports and the like. Further percentages would be peeled away assuming the adoption lifecycle of PSIM-like technologies in those environments (long sales cycles, integrator reluctance, etc). That sort of estimation could very reasonably find $1bn to $5bn or more of expected spending on PSIM products over the next few years. One magazine published a quote by a vendor claiming $10bn by 2012.
So, it's very reasonable that (using a fairly ambitious 6 percent overall growth rate for the industry during a brutal global recession) of the $60 billion spent on security products and installation that about nine percent of that would be PSIM software? What? Even take the $1b number. Is PSIM software going to be more than one percent of the overall industry spend? That doesn't seem right to me. But, moving on:
How many of those $1bn+ organizations will spend $100,000 or even a million dollars by 2012? To determine that, we interviewed end user executives in 15 more companies and described scenarios where PSIM solutions could produce value (see Table 1). For example, we described specific uses of technology to handle situations involving three or more data types in corporate, transit and government environments. ... For every Global 3000 candidate able to spend $100,000 and more, there will likely be three or four candidates in the much more populous mid-sized corporate or government categories spending $50,000 or more, effectively doubling the total spend of the large organizations.
First, there's a big difference between a company willing to spend $100,000 and $1 million, but say every single one of the Global 3000 spends $100,000 on PSIM software (that seems pretty ambitious, right?). That's only $300 million. So then let's say there are 12,000 of those smaller companies willing to spend $50,000 each (again, pretty good market penetration, I'd say). That gets us another $600 million. So, if the PSIM companies out there today - Intergraph, Orsus, Proximex, Lenel (do they even count?), VidSys, CNL, etc. - deploy 15,000 systems in the next four years we're talking about total spend of $900 million. Double the costs of the systems across the board. 15,000 systems for $1.8 billion. Unless we're including the cost of all the other technology involved in a system run by PSIM software, or we're including all the installation and service, I just don't see how you get to something like $3 billion. And nowhere in Hunt's post is what he thinks those companies' revenues are right now. Doesn't that matter? You'll see the question by John Honovich on the bottom of Hunt's post. He posits their sales at $200 million in 2008. To get to $3 billion, that would require a CAGR of 97 percent. Even if it's $500 million, we're talking a growth rate of 57 percent. Why would it be so much faster than analytic growth? Why would we be spending $140 million on analytics and $3 billion on PSIM software. Aren't there a lot of applications where a couple analytics might make sense but a full-blown PSIM installation might not? The real point of all this is that I just don't see how these two guys could come to these two conclusions independently of each other. They seem wildly disparate. I guess that's why you shouldn't bother asking me for a prediction. What's the market going to be in 2012? I have no idea, really.

What do the UTC layoff numbers mean?

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Wednesday, March 11, 2009
I've read through the 2008 annual report that UTC put out recently, and I think I've got a pretty good handle on what those layoff numbers will mean for their Fire & Security business. (And, yes, I did call and ask them what they would mean, and this is the only comment they're making: "The restructuring will affect all UTC business units to some extent, but the exact number of jobs at individual buisness units and locations has not yet been determined.") However, these layoffs aren't that new or dramatic for UTC. It's just that most people weren't paying attention to layoffs last year when the economy hasn't yet totally nosedived. First, here's where you can find their annual report yourself. It's one of the most detailed and well put together annual reports you'll find, I must say. I recommend downloading the pdf, as the interface online is a little slow for my taste. Now, on to the analysis. See, in 2008, the company announced $357 million in "net pre-tax restructuring and related charges," which the company predicted would translate to 6,300 hourly and salaried employees. So, for 2008, they were basically valuing an employee at about $56,666 (obviously, not all of that restructuring cost is laying off employees - it's also closing facilities and doing away with assets, etc., but I think you'll see it basically works for my reasoning). UTC recorded $63 million in charges for the F&S segment, which is 17 percent of the total charges. So, if you take that 17 percent and apply it to the 6,300 jobs, you get 1,071 jobs, or, if you take $63 million and divide it by $56,666 you get 1,111 jobs. So a ballpark of 1,100 jobs lost at UTC F&S makes sense to me. Now, for 2009, they're predicting $750 million in restructuring and 11,600 jobs eliminated. So, this year, they're theoretically valuing jobs at $64,655 each. But what percentage of the restructuring will be attributed to UTC F&S? In 2007, the company attributed 23 percent of $166 million in restructuring to F&S, and in 2008, as I said, it was 17 percent. So, should we average the two and go with 20 percent? Well, it might be higher than that. If you look at UTC's six business segments right now, F&S has just about the lowest operating profit margin at 8 percent. Further, while they only contribute 11 percent of the company's revenue, they make up 19 percent of its workforce. Further further, if you divide revenue by employees, each employee only creates about $150,000 in revenue at F&S, vs. an average of $260,000 for the whole company. This is likely because F&S is the most in-the-field-oriented of the business units (I'm sort of guessing here, as Otis does a lot of installation) and maybe employs a lot of lower-wage techs across the globe. So maybe we just take the high side of the 2007 and 2008 percentages and say 23 percent of the restructuring will affect F&S. So, 23 percent of $750 million is $172.5 million, and that divided by $64,655 is 2,668 jobs. Or 23 percent of 11,600=2668. So, I think a ballpark of 2,500 jobs lost in F&S is fair. What percentage of that is in North America? Well, 83 percent of F&S' revenues were generated outside of the US last year, but they do a lot of business in Canada, so maybe 70 percent is outside of the U.S. and Canada, so maybe 30 percent of those job losses are in North America? That works out to about 750 jobs. Not too dissimilar, actually, to what ADT just announced. This is very rough, obviously. If anyone sees major holes in the reasoning, let me know.

NationWide Digital partners with Xanboo for remote video monitoring and security controls

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Wednesday, March 11, 2009
I got a release from Xanboo recently. NationWide Digital Monitoring Co., Inc., a central-station monitoring outfit since 1979, announced March 5 it will partner with Xanboo, Inc., for its line of remote security control devices and video monitoring technology. The partnership will immediately enable NationWide’s dealer force to distribute, install or integrate Xanboo’s products for new and existing customers throughout the United States. Xanboo’s remote security solutions provide an end-to-end technology platform that enables access and control of devices locally or remotely over the Internet via a mobile phone or PC. Residential and commercial subscribers can use Xanboo’s systems to control and monitor devices in their home or business from anywhere in the world with a standard Internet connection.

Another big security company cuts jobs

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Tuesday, March 10, 2009
I'm just starting to figure out what this means for their security and fire businesses, but UTC is cutting 11,600 jobs. There are very few details in the release and the company makes everything from elevators to jet engines, so security isn't necessarily top of mind for mainstream reporters. Considering the consolidation they've done recently with Initial and Red Hawk, however, I've got to think there will be some trimming in their installation business somewhere. Hopefully I'll have more on this in the newswire Thursday.

Cisco on standards, ISC West

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Monday, March 9, 2009
There’s been quite a bit of buzz about Cisco’s doings in the industry. Any number of online ponderers have wondered openly about Cisco’s commitment level, especially considering their apparent absence from ISC West (not on the exhibitor list). So, I called up Pete Jankowski, director of product marketing at Cisco (actually, I arranged a conversation through a PR gal, but that’s just like calling someone up in this day and age), and Cisco’s liaison to the PSIA, who handed over a great deal of work that eventually turned into PSIA’s device discovery specification. Here's our conversation (the transcribing is a little quick and dirty, so forgive any typos): Sam: So, Pete, why’d Cisco join ONVIF, if you’re already so involved in the PSIA? Jankowski: One thing is, having the two standards is better than having multiple standards for every camera manufacturer out there. I’d like to get PSIA and ONVIF together, get their models together, maybe eventually getting one standard, getting that through SIA, and that’s eventually going to a ANSI standard. And Cisco has a lot of products that are just video, not necessarily surveillance, so we need to be able to support both PSIA and ONVIF. We’re working on a project called Medianet, an initiative to make the network much more video content friendly. It’s: recognize a camera, or an encoder, authenticate it, set up QoS for the video, set up an RSVP connection, which would change the bit rate, etc. So that’s what Cisco is working on internally, the switching and routing portion of the business, with our telepresence group, digital media signage group, Scientific Atlanta, and Linksys for home stuff. Just make it easier to deploy video and audio products, make it much easier to set up and the network a lot friendly to the video. If you drop packets or the bit rate, the video can fall apart, so making the networ more friendly for the video is what Medianet is all about. That being said, PSIA and OINFVI are building standards based on two different types of methodology. One is SOAP, which is ONVIF, then there’s PSIA which is REST and xml based. both of them have their merits. It’s almost a religion. Some like web services, some like xml. Sam: But they’re not mutually exclusive, right? Jankowski: There is overlap, the idea is eventually – what I’m hoping, the groups are still talking – the data is all the same. If you ask for the stream for the camera, it’s the same with both, an RTSP stream. The cameras are putting out the same thing, just over a different community request, but the end result is exactly the same, so eventually I’m hoping that we’ll get the data models pushed together and come up with more of a unified standard, but I don’t think that will happen right away. That will take a little bit of time. But either one is pretty good. They’re both going to be very helpful for integrators and customers, anyone deploying IP cameras, third-party software vendors, they only have to write to two of these, and it will make their lives so much easier. Currently ONFIV is using WS discover to bind the devices, and PSIA is using zero config, which is bonjour, the Apple standard. That’s what the discoveries are being based on, and then provisioning is RESTful and SOAP. But both groups are talking, and they’re planning a meeting at the ISC West show. There will be a lot of work together. This is not betamax vs. VHS, or blu-ray vs. HD – it’s just a way of talking to the devices, and currently the industry doesn’t have a standard, so this way there will only be two. Sam: And so how does this work with SIA? Jankowski: SIA has a whole data model put together, but they never really came together on the other side. That’s one reason these other two started up. We’re also all working with SIA, so it’s going to be all collaborative, hopefully. But I don’t think, in my opinion, that everyone will follow the SIA data model right now. And then you’ll start seeing PSIA has some initiatives around access control, video analytics, and storage, so those three initiatives that they’re starting up. And ONVIF is staring up in storage as well. So as these initiative are put together, the plan is to make them all interoperable. And I might be able to participate and help out. One of the things that’s lacking in a lot of the standards is network security, in my opinion, just stuff like encrypting the video, authenticating the video at the end of the network, when you’re logging in, password protection, device-attach protection, those types of things, almost none of the companies do a very good job of that at all. They put an Ethernet nick on the back, and almost use it like a serial port, they don’t consider the ramifications of physical network security, and we can help both of them get those network security standards in there and help them with those. So their end devices are secure end devices, that’s one of the big benefits that Cisco can offer. I’ve been pushing that with both. I’ll be doing a presentation to both groups on Medianet. Sam: Okay, so then I want to ask you about ISC West. There’s a lot of buzz about why you guys aren’t exhibiting. What’s happening there? Jankowski: That had something to do with our marketing budgets, we had our marketing budgets changed last year, and Cisco has a group that runs all their large trade shows, so they bill our business unit an extraordinary amount of money for a trade show. We couldn’t do it ourselves, so we had a choice between ISC and ASIS. So they made the decision that we’d do a huge splash at ASIS and do meeting rooms and seminars and speeches at ISC West, so we won’t do a booth, but we can now get around the Cisco requirement for supporting a booth. Sam: You mean you weren’t just going to do a 10x10 at ISC West, if you were going to do it, you were going to do it. Jankowski: We could have done a 10x10, actually, but if you go to a 20x20, it has to be corporate run, and it’s a huge amount of money. Even though we’ve got a bunch of new products, especially around IP cameras, we figured that AISS would be a bigger show and we could do a bigger splash. Everybody says you’ve got to be crazy not to have a booth at ISC. And I think that will change later, that position, we’ll be at ISC again. But that’s the reason why we’re not there this year. Sam: So, you’re not thinking of pulling out of physical security altogether, as some have posited? Jankowski: Security is on John Chambers’ top list, there’s going to be a lot of focus on it, probably a lot more focus, I would expect, in the next year.

Brink's stock and Brink's commercial biz

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Friday, March 6, 2009
I keep coming across stories about Brink's Home Security stock. Since it's the sunniest stock news I can find, here's one of those stories. Speaking of Brink's, I interviewed Brent Uhl yesterday. He's in charge of their commercial division and was also featured in our "20 movers and shakers under age 40" feature in 2007. Brent filled me in on what Brink's has been doing over the past year ramping up their commercial efforts. I'll be writing a story about that for the April (ISC West) issue.

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