Subscribe to

Blogs

From the beach to the mountains

 - 
Thursday, December 11, 2008
Did you see yesterday that ADT and Simplex parent company, Tyco, is mulling a move to Switzerland from Bermuda? Here's the story. I'm sure this has nothing to do with financial manuevers. Ed Breen must have taken up skiing, or maybe he's a jazz fan. Here's something to brighten your day, even if you're not Ed Breen: a young Oscar Peterson at the Montreaux Jazz Festival. Wow.

Labels: , ,

SCM and Hirsch to merge

 - 
Thursday, December 11, 2008
There's news out on the wire that SCM Microsystems, a logical access manufacturer, and Hirsch Electronics, a physical access manufacturer, are merging. They kept the numbers out of the press release, but the SEC filing makes it look like a $30 million acquisition of Hirsch by SCM, with Hirsch shareholders acquiring another $14.1 million worth of warrants to buy more SCM stock at $3 a share, which is about double the price it's trading at right now on NASDAQ. I'm looking to grab some interviews on this as we speak. My initial impression is that this is a cool move for both companies, and with all the real talk I've been hearing lately about physical and logical access convergence getting almost easy to accomplish, it seems like a good business decision, too. Though IP video might get more attention, the applications for IP-based access control solve a lot of real-world problems and people sure do hate having to carry around gobs of cards for access to different servers and locations.

Colorado Springs PD recognized with SIAC Director's Award of Distinction

 - 
Wednesday, December 10, 2008
A recent press release from SIAC spotlighted the Colorado Springs Police Department for its instrumental role in developing an open to the public process for creating an agreed upon false alarm ordinance for city officials to vote on. The SIAC award, presented to the CSPD at the city's Dec. 9 city council meeting, recognizes the CSPD's foresight in establishing an open public meeting process that ensured all parties with an interest in the alarm ordinance had a forum in which to express opinion on issues of concern. The award emphasizes the importance of the initiative's community spirit, exemplified by the coming together of law enforcement, private citizenry and the security industry in a decision making process, the results of which affect everyone. In the release, SIAC representative Dave Simon said he saw the action of the CSPD as trend setting. Over the past five years, many communities across the United States have revised their ordinance. The Colorado Springs Police Department stands out for openly engaging its citizens and setting an example of grassroots democracy for other communities across the country. By involving all interested parties, the Department should be saluted for its leadership in developing a consensus alarm ordinance document that can be emulated in other cities. In the release, Colorado Springs mayor Lionel Rivera praised the joint efforts of all to produce a document that was universally fair and acceptable. Good public policy is a direct result of hard questioning that has our community's best interests at heart. The open public discussions of the ordinance hosted by the police department and council's public hearings have resulted in an ordinance that is fair to the alarm users, alarm industry and our Colorado Springs taxpayers.

Tracking baby Jesus

 - 
Wednesday, December 10, 2008
Ah, a fine Christmas fable. I'm a sucker for this kind of thing. While the TV news version of the story might be worthless (another mystery "security company") the full version put out by the AP is quite sweet and well reported. Just goes to show that there is, indeed, value in original reporting. Just look at this lede (that's a journalism term): When Baby Jesus disappeared last year from a Nativity scene on the lawn of the Wellington, Fla., community center, village officials didn't follow a star to locate him. A GPS device mounted inside the life-size ceramic figurine led sheriff's deputies to a nearby apartment, where it was found face down on the carpet. An 18-year-old woman was arrested in the theft. That's some good writing, that is. The story goes on to detail the frequent theft of the baby Jesus, and what churches are doing about it. And then there's the security company (BrickHouse Security, an online straight-to-consumer distributor, to be exact), that had the smarts to make a great PR decision: Sensing opportunity in that kind of success story, New York-based BrickHouse Security is offering up to 200 nonprofit religious institutions a free month's use of security cameras and LightningGPS products it distributes. Chief executive officer Todd Morris said the idea was born after a few churches asked about one-month rentals instead of longer contracts that are the norm. It doesn't look like they're using central station monitoring, just devices that can be accessed via web browser. Doesn't mean you can't steal their idea, though, and offer a more robust solution to holiday theft.

Getting the word out

 - 
Tuesday, December 9, 2008
I saw this online this morning, it's Apx Alarm's holiday promo: Through Jan. 9, new customers get a free security system and a $50 certificate to Home Depot. Here's a press release Apx put out on PR Newswire about the promo. I'll be interested to see how this campaign goes for them, but this element of it doesn't cost any more than the writer's time, so why not?

Sony cutting 8,000 jobs

 - 
Tuesday, December 9, 2008
There's no mention of security operations in this article, but it does say that all of the job cuts will come from the electronics division, where the CCTV section resides. It does mention the outsourcing of image sensors, but says those were intended for mobile phones. Not sure if the same chips go to surveillance cameras.

New president at Cooper

 - 
Monday, December 8, 2008
Cooper Notification has a new president, Scott Hearn. Hearn was most recently the vice president, business development for Cooper Lighting. Before that he was with Trane Incorporated, where he served as iVP, Strategic Relationships and VP, Operations, Americas. Prior to Trane he held the position of president and CEO of GELcore, LLC, a Joint Venture with GE. He started his career with GE, holding a variety of roles within GE Lighting and GE Home Electric Products. I interviewed Scott this morning and will have something on the newswire this week.

False alarm ordinance compliance push tied to utilities

 - 
Monday, December 8, 2008
It struck me as a little odd this morning when I read that the Cordele, Ga. city commissioners had decided to add false alarm fines to alarm users' utility bills, and that failure to pay the false alarm fines would result in loss of utilities. An excerpt of the story, from the Cordele Dispatch, follows: CORDELE, Ga. According to the Cordele Dispatch, city commissioners here voted on Dec. 4 to adopt a new ordinance that will result in fees for excessive false alarms. The move comes from concerns that false alarms generated by alarm systems in city residences and businesses often lead to a misallocation of police manpower. Once the ordinance takes effect on January 1, 2009 alarm users will be allowed five false alarms for the year. Any false alarms past five will result in the user being charged a fine. The sixth and seventh false alarms will carry a $50 fine each. False alarms 8, 9 and 10 will result in a $100 fine for each. Alarm users will be fined $250 each for the 11th and 12th false alarm, and a $500 fine will follow 13 or more false alarms. Fines will be added to the utility bill of the user. Failure to pay fines will result in loss of utilities. The ordinance extends to churches and schools as well as residences and businesses. Alarms installed on motor vehicles, fire alarms, domestic violence alarm, or alarms designed to elicit a medical response are not covered by the ordinance. Users will be required to fill out an application and register their alarm systems through the Cordele Police Department and pay a registration fee of $10. Anyone failing to register an alarm system will be fined $100. Now keep in mind, I live and work in Maine, where right now it is a crisp 20 degrees out. It seems kind of scary to me that the city could take away my utilities, my heat, even though I've paid my obscene oil bill. Don't get me wrong, I know that the city needs to recoup losses due to excessive false alarms, and attempt to implement some sort of system to hopefully encourage people to make sure their systems work properly, but messing with people's water, electricity or heat seems a little over the top to me. Well, I guess that's one more reason to be sure your alarm systems are registered and in proper working order.

G4S eyes Brink's, Garda

 - 
Monday, December 8, 2008
Though it's a little more interesting to the folks on the armed-guard/cash-handling side of the business, take note of this Bloomberg article saying G4S considers Brink's and Garda World possible acquisitions. If nothing else, it shows G4S, the second biggest security company in the world, is thinking aggressively in the current down market, and it wouldn't be crazy for them to also think about aquiring a big integrator to supplement the newly expanded integration and security system services arm. If they're coming to the Americas, don't expect them to come tentatively. G4S has spent more than 530 million pounds ($788 million) this year on acquisitions, including the U.K.-based prisoner transport company Global Solutions Ltd. and war-zone security firm ArmorGroup International. Of course, in the same article, we find out: CEO Nick Buckles expects the firm to be "very quiet" in the first half of 2009.

Sneak peek of January's finance special report

 - 
Monday, December 8, 2008
As loyal readers know well, each January we publish in the paper our special report on the financial state of the industry. Lately, it's been targeted most at the availability of capital - while there are many ways to judge an industry's health, many of them don't apply well to the security market, since there are so few public companies with open books operating here. Especially on the integration and installation side, the books are particularly opaque. However, if lenders are still bullish on the market, that speaks to the overall health of things. Lenders are generally not in the business of making loans to companies they think will fail. As money gets more expensive and difficult to get, it says the industry is less of a clearly good investment. This year is a little different, of course, since money is more expensive and harder to get no matter what industry you're in. But the fact remains that the security industry (and here I mean the traditional RMR-based security industry most of all) is seen as something of a safe port during the storm. Take a look at last year's report. My headline was "Business as Usual." My sources accurately predicted that times were getting tight, but that well-run alarm companies should be unaffected, in terms of borrowing power. This was, to some extent, vindicated by the Pro One. They managed to add to a $275 million credit facility with Bear Stearns and Lehman Brothers, by taking on another $110 million to pay off some notes, back in March, just as Bear and Lehman were totally falling apart. To quote CEO Richard Ginsburg: The fact that Pro One was able to get the deal done at a time when "the debt market is effectively closed … says a lot for our industry and for Protection One." He said, "Market conditions are particularly harsh; existing debt is trading 70 to 80 cents on the dollar … A lot of companies are having a difficult time financing anything." Things are even more difficult now, and there was general agreement that even in the alarm industry, especially as the deals get bigger, it's going to be hard to find money. Both Capital Source and CIT, big traditional lenders to the industry, have had their difficulties, to different extents, and both companies told me they're having a harder time finding partners to go in with them on large deals. There just aren't as many big lenders around with any cash. That's why many of them, CIT and Capital Source included, are looking to become, or have already become, bank holding companies, which means they can take deposits. Problem solved, right? Deposits are the cheapest of all money - they give it to you for free! Unfortunately, those lenders now come under far more federal scrutiny and have less ability to get creative with the deals they make, so their prices and covenants will come to more closely resemble the traditional bank lenders (Bank of America (LaSalle), BankNorth, and CitiGroup), and there will be less variation in the deals that are done. This could be a good thing. Conservative deals are often successful deals for both parties. However, if you've got a shaky system for reporting your finances, or are not profitable, it's going to be majorly difficult now to find any money at all. That may have always been somewhat true, but it's the gospel now. Many different people have told me that a company's best investment for 2009 is in hiring, or giving a raise to, a top-notch CFO/accountant. Knowing exactly what your books and attrition look like is paramount in finding money. Due diligence is at its recent apex. I also heard that summer model contracts are not being valued very highly by some lenders, so don't think that's the way to go. But what about the commercial integrators? Well, the same rules apply, but everybody agreed that the less RMR you have, the harder it's going to be to find money. One lender told a story about a fire installation firm using its stored up RMR as an asset to sell to finance expansion in this down economy, making it possible to enter new rebuild markets instead of being dependent on new build. Smart move. But if you don't have RMR to sell off as an asset, you're not going to find it as easy to get money for that same expansion. Borrowing to create more revenue is possible, but what are you borrowing against if you're living job to job? You better own your building. Finally, what about this talk about manufacturers struggling and maybe facing extinction, like Steelbox? John Honovich posted a partial analysis recently talking about certain manufacturers being in trouble for 2009. I agreed with this slightly more before I did much of the reporting for this story. Basically, what I'm being told is that venture capital should still be available in roughly the same quantity as before. Yes, hedge funds and VC firms are going under or going away, but many of these venture firms have already raised money for funds and still need to put that money to work. They're not just going to sit on it. They're still going to be looking for good technology that needs a cash infusion and might be a good risk. They're willing to suffer nine bloodbaths if the 10th firm is the next Google. That's the game they play. So it might not be as hard as I thought for companies to raise their next funding round in 2009. What's going to be hard is for those companies that are a little more mature and would logically make the move from start-up capital to debt funding. Debt funding is going to be hard to come by for an unprofitable firm, and even more so for a manufacturer with no assets other than intellectual property. Patent protection is going to be even more paramount, as will be staying away from what are seen as dodgy markets: retail, municipal and state spending, new construction, anything to do with the auto industry, etc. So, if these are John's criteria for evaluating the risk of a manufacturer: Growth Rate of Segment the Company is in Profitability of Company Cash Position of Company Competitive Positioning of Company's products I might just add some nuance. It's all well and good to be in a high-growth segment like IP video, but if your IP video is targeted at the retail market, like, say, an Envysion, then that might not be the same as an IP video company like SightLogix, which is targeting the federal government and critical infrastructure. Profitability will be more important as a company ages. If you're new and unprofitable, that might be okay, as venture firms might be looking for a place to put their money on a good bet. If you're older and unprofitable, you won't be able to find a loan to keep you afloat. Cash is king. There's no doubt about that. Finally, competitive positioning. In an ideal world, how good your product is and how well it solves a problem would dictate how successful you are in making sales. But if you're not cash-positive enough to invest in marketing and getting your word out, you're going to get hammered by the bigger brands with better recognition, dealer channels, distribution relationships, and more cash in the bank. Further, I think a recession is as much psychological as it is economic. If people think things are bad, they are bad, and that makes them more conservative. A conservative mindset does not help a new technology make inroads; it helps an established technology keep its foothold. So, will we see a rash of IP camera and analytics makers go out of business in 2009? The lenders I spoke with thought there'd be some consolidation and culling of the herd, but didn't think it would be dramatic. More than one said the fears were overblown. We'll see.

Pages