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On skyrocketing, and not

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Thursday, October 11, 2007
This story, from First Coast News in Florida, is classic mainstream journalism regarding security systems - in that it's terrible. Basically, the story is "Security Camera Sales Skyrocket," but, of course, they give no actual evidence for this supposed skyrocketing, they don't consult any of the easily available market research data gatherers (Frost & Sullivan have overall camera sales growth at about 8.6% for 2006), and they take the word of one integrator, Certified Security, as gospel for the entire industry. Now, Certified is a fine First Alert dealer and I'm sure owner Joe Hassan knows what he's talking about, but check this part of the story: Hassan says business has skyrocketed in the past 18 months because the devices have become less expensive, and more necessary. "People do less bad and more good when they know they're being watched. It's a fact of life," said Hassan. Actually, this is not a fact of life. There isn't, in fact, a direct correlation between people knowing they're being watched and their behavior. Just see this study on intersections where people are told they're being filmed and the rate of red-light running. Or, even better, this study about convenience store robberies. And I quote: Cameras were removed from control stores that previously had them and put into experimental stores. Also, the experiment was announced publicly to make potential robbers aware of the changes. The results of the experiment showed that there were no statistically significant differences between experimental and control stores. In fact, robberies decreased in all stores except Baton Rouge, where the increase was too minimal to be considered significant. These results suggest that increased reliance on cameras as opposed to other robbery prevention techniques is not effective. However, there are problems with drawing inferences from this experiment since randomization was not used. People who commit crimes are not rational actors. They're motivated by something much stronger than reason - usually a need for drugs, really. I believe cameras are great for business efficiency and for catching people after they commit crimes, but they simply don't work as deterrents unless they have analytic capabilities that can alert a responder in real time to prevent the crime from occuring. You'd think a news organization would look into that sort of thing. It's a kind of interesting slice of human behavior. Here's more from the news article: "Your alarm systems prevent and detect, your video camera's actually after the fact, help catch, prosecute, and basically give proof to put someone in jail," said Hassan. Okay. Sounds reasonable. Is there a reason we're making cameras plural by using an apostrophe? "Camera's catch everything," said Shea. Wow, they did it again. Hassan says some businesses that have really gotten into the surveillance systems are day cares and insurance companies that are requiring the companies they insure to have the cameras installed. Another feature of the surveillance camera's, is that you can access them from anywhere in the world on the internet. A third time! Cameras are apparently so special and selling so fast that you need to make them plural with apostrophes! Now that's skyrocketing. Also, I love that this is the last paragraph of the story. They didn't feel any need to elaborate on this point? Also also, I'm sure Hassan is mostly selling to day cares and small businesses that are mandated by insurance companies to have cameras installed, but is it likely that these two verticals are where you find most cameras installed? I'm thinking not. Good reporting First Coast News. Don't you have a car crash to cover somewhere?

Good times for camera sales in FLA

 - 
Thursday, October 11, 2007
This story, from First Coast News in Florida, is classic mainstream journalism regarding security systems - in that it's terrible. Basically, the story is "Security Camera Sales Skyrocket," but, of course, they give no actual evidence for this supposed skyrocketing, they don't consult any of the easily available market research data gatherers (Frost & Sullivan have overall camera sales growth at about 8.6% for 2006), and they take the word of one integrator, Certified Security, as gospel for the entire industry. Now, Certified is a fine First Alert dealer and I'm sure owner Joe Hassan knows what he's talking about, but check this part of the story: Hassan says business has skyrocketed in the past 18 months because the devices have become less expensive, and more necessary. "People do less bad and more good when they know they're being watched. It's a fact of life," said Hassan. Actually, this is not a fact of life. There isn't, in fact, a direct correlation between people knowing they're being watched and their behavior. Just see this study on intersections where people are told they're being filmed and the rate of red-light running. Or, even better, this study about convenience store robberies. And I quote: Cameras were removed from control stores that previously had them and put into experimental stores. Also, the experiment was announced publicly to make potential robbers aware of the changes. The results of the experiment showed that there were no statistically significant differences between experimental and control stores. In fact, robberies decreased in all stores except Baton Rouge, where the increase was too minimal to be considered significant. These results suggest that increased reliance on cameras as opposed to other robbery prevention techniques is not effective. However, there are problems with drawing inferences from this experiment since randomization was not used. People who commit crimes are not rational actors. They're motivated by something much stronger than reason - usually a need for drugs, really. I believe cameras are great for business efficiency and for catching people after they commit crimes, but they simply don't work as deterrents unless they have analytic capabilities that can alert a responder in real time to prevent the crime from occuring. You'd think a news organization would look into that sort of thing. It's a kind of interesting slice of human behavior. Here's more from the news article: "Your alarm systems prevent and detect, your video camera's actually after the fact, help catch, prosecute, and basically give proof to put someone in jail," said Hassan. Okay. Sounds reasonable. Is there a reason we're making cameras plural by using an apostrophe? "Camera's catch everything," said Shea. Wow, they did it again. Hassan says some businesses that have really gotten into the surveillance systems are day cares and insurance companies that are requiring the companies they insure to have the cameras installed. Another feature of the surveillance camera's, is that you can access them from anywhere in the world on the internet. A third time! Cameras are apparently so special and selling so fast that you need to make them plural with apostrophes! Now that's skyrocketing. Also, I love that this is the last paragraph of the story. They didn't feel any need to elaborate on this point? Also also, I'm sure Hassan is mostly selling to day cares and small businesses that are mandated by insurance companies to have cameras installed, but is it likely that these two verticals are where you find most cameras installed? I'm thinking not. Good reporting First Coast News. Don't you have a car crash to cover somewhere?

More bad news for USProtect, GSA

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Wednesday, October 10, 2007
Okay, so not only does the GSA have a bribery problem, it has a not-doing-its-job problem, too. The Washington Times (America's newspaper, dontcha know) reports that USProtect, the company that bribed its way to government contracts back when it was known as Holiday International, wasn't even on the up-and-up when it put in its application for GSA scheduling. Richard Hudec, 44, was charged in federal court in Maryland last week with tax evasion and concealing information about his background, which included four felony fraud convictions, in connection with his role as chairman and chief operating officer for USProtect Corp., a private security company. Oops. But, of course, Hudec isn't the story here. I include items like this for your perusal not because this is somewhat related to the practice of installing security systems, but because many of you have to work with the GSA, and there is now more than a little reason to doubt the GSA's competence. Some details of Mr. Hudec's incarceration can be obtained over the Internet. For example, the federal Bureau of Prison's free public inmate locator database — www.bop.gov — shows that Mr. Hudec was released from prison on Feb. 21, 2001. According to charging documents, Mr. Hudec "assisted in the preparation and submission" of the security company's application to the General Services Administration in 2002, which once approved placed the company on the federal supply schedule, a clearinghouse of government-approved contractors. The application listed Mr. Hudec as chief operating officer and improperly certified that no principals of the company had any fraud judgment within the past three years, authorities said. Okay, so that may be some crappy writing on the part of the venerable Times, but it essentially makes the point that you could have Googled this guy and discovered he was a felon. I'm all for giving people a second chance, but something in my gut says people who've been convicted of multiple fraud counts maybe shouldn't be working with the federal government. USProtect is competing with a number of well respected companies for this government work. Is the GSA keeping appropriate tabs on your competitors as you vie for contracts?

Linear-IEI deal goes final

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Tuesday, October 9, 2007
I don't have a link to a release, as it was only emailed to me via Word file and I can't find anything official on the web, but Linear has now confirmed that the deal agreed to in May to acquire International Electronics, known as IEI, has been consummated. However, the release doesn't indicate whether the initial financial terms remained the same. Anyhoo, here's the relevant piece of the release, if you're interested: The Home Technology Group of Nortek, Inc., a group of home and commercial convenience and security electronics companies lead by Linear LLC, a wholly-owned subsidiary of Nortek, has made a move to significantly strengthen its presence in the access control industry with the purchase of International Electronics, Inc. IEI, headquartered in Canton (Boston area), MA. IEI has been in the security and controlled access systems business for over 30 years. The two companies have very much in common with their line offerings but very little actual product overlap. The IEI line ranges from its Door-Gard stand-alone and entry-level access control products to its flagship product, eMerge, a browser managed integrated security management system. Linear has traditionally been in access control for perimeter security, including telephone and gate entry. Linear Chairman Grant D. Rummell noted the opportunity for synergy arising from the complementary Linear and IEI product lines. “IEI is a market leader in access control stand alone keypads, locksets, and systems access control products and this will greatly broaden the over-all Linear offering,” he said. “At the same time,” Rummell pointed out, “IEI’s experience and innovation in the areas of access control software adds substantially to our systems depth.” IEI President and CEO John Waldstein stated: “We look forward to the added market presence the association with Linear affords us and the opportunity for growth it provides. Being part of a strong access control and security industry leader allows us to continue to broaden our access control offerings as well as continuing to assure our commitment to excellence in service and support.” Plans call for IEI to continue at its Canton, MA, facility and to maintain and expand the IEI brands. Don't they know that all we care about is what they paid for IEI?

Zebra Technologies buys proveo, Navis is next

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Tuesday, October 9, 2007
If you're like me, when you think Zebra, you think printers, but the company is rapidly becoming much more than that, turning itself into a major player in the RFID market. This week, Zebra announced an intent to buy Navis, a California-based manufacturer of RFID solutions directed at the maritime market, having been the first to provide automated container terminal operating systems in 1988, which improve velocity and visibility of cargo movement. Considering the SAFE Port Act and its mandates, this seems like a wise investment of $145 million (to be paid in cash). Add this move to the 200 patents the company bought in the first part of this year, and a secondary announcement this week of the acquisition of proveo AG for $16.3 million, getting into the business of tracking ground service vehicles at airports, and Zebra is looking like a force in tracking important things in two rapidly growing large security verticals. Clearly a company to pay attention to. Trackings things as a service could provide a tidy RMR. Oh, and Zebra expects $60 million a year in revenue from Navis going forward.

A kinder, gentler Johnson Controls

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Monday, October 8, 2007
Have you seen this new Johnson Controls logo? It looks like it was designed by the elves of Lothlorien. And I consider that a compliment. If they're going to work this enviro theme, they might as well have a warm and gentle logo that makes people think they're the green type right away. I mean, look at this old logo. What were they selling, Slinkies? I think more and more companies and municipalities are going to be attracted to Johnson Controls' holistic approach to building management, which encompasses everythign from HVAC to security. It's a pretty easy sell when you guarantee by contract that your client will be able to pay for new security systems with the money saved on energy costs. I'd link to the full story, but JC uses a frame set I can't link directly to, so here's the first paragraph of the deal they made with a city and county in Montana: The City of Laurel has recently completed, and Flathead County has recently begun making infrastructure improvements enabled by energy savings performance contracts with Johnson Controls, Inc. These projects benefit both businesses and residents by saving the city and county more than 25 percent of their existing energy budget. Johnson makes them think they're saving money, but really they're spending more money with Johnson Controls. Brilliant. Oh, and it's good for the earth and all that, too. Sweet.

Who's the mystery buyer?

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Friday, October 5, 2007
Pure Technolgies, a publicly traded manufacturer based in Calgary, announced this week it intends to sell its video subsidiary, PureTech Systems, which landed a big contract with the Port of Halifax earlier this year. The buy, apparently is a U.S. company and the price tag is $3.25 million. Seems fairly cheap, really. But who's the buyer? Pure ain't saying: Pure didn't name the purchaser, but said it was an advanced sensing technology firm whose principal market is Homeland Security. That kind of sounds like iCx, I guess, but it could be anybody, really. What does "advanced sensing technology" mean, anyway? Analytics? Sweet motion detection? Chemical detection? Who knows? Anyway, since the deal apparently closed Oct. 1, why doesn't the purchaser want to be named? What's the big secret?

Bribery and private security

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Thursday, October 4, 2007
I try not to get too much into the guarding market, except for when it overlaps with systems integrators and installers, but this is a crazy story. Many security firms work with the GSA, and it seems as though the GSA isn't always on the straight and narrow. Here's the nut graph: According to court papers filed in the case, [Michael] Holiday, a former Montgomery [Maryland] police officer, plied a government contracting official with $100,000 in cash and paid for her $7,000 Caribbean cruise. In exchange, prosecutors said, the General Services Administration employee granted favorable treatment in the bidding process to Holiday's company. Holiday's firm, Holiday International Security, went on to acquire $130 million in government contracts. Pretty good return on that $107,000 investment, no? Among the agencies that awarded contracts to Holiday International Security was the Social Security Administration, which continues to use guards from the renamed company at its Woodlawn headquarters and several other buildings in the Baltimore region, federal officials said. ... The Silver Spring company, which changed its name to USProtect when it was sold in May 2003, provides armed and unarmed security guards for 18 federal agencies at 120 installations in 32 states and territories. So, I'm guessing the company won't now lose all of its contracts. While the prosecutor called the case the largest government corruption case in Maryland history, it's not clear that you can really ascribe all $130 million in contracts to the bribery. Theoretically, Holiday/USProtect were really providing the services, so maybe it's only the amount of the bribe that should be evaluated. That's semantics, though. In general, I love it when real life is just like the movies: Prosecutors allege that the former GSA contracting official, Dessie Ruth Nelson, 65, of Oakland, Calif., received a shopping bag filled with $35,000 in cash and an envelope stuffed with $10,000 from Holiday, in addition to the cruise, among other benefits. In turn, between 2000 and 2003, Nelson steered millions of dollars worth of contracts to Holiday's company, federal authorities charged. I mean, where did that happen? In her office? In a shopping mall parking lot? Did Holiday just waltz into the GSA with $35,000 in a shopping bag and hand it over like he had just picked something up at the grocery store for her? Oh, and I can't believe this paragraph was left for last: In addition to the bribery and tax charge, Holiday also admitted as part of his guilty plea that in April 2004, he sent a video file depicting a young girl engaging in sex with an adult male to an undercover FBI agent in New York. He could be sentenced to a maximum of 15 years in prison for bribery and 20 years for transporting child pornography. Holy smokes! So, the guy's involved with Maryland's largest-ever corruption case AND he's into kiddie porn? Does anybody else feel like this is bad PR for the private security marketplace? Wow.

Stanley Works to buy OSI Security Devices

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Wednesday, October 3, 2007
In a deal that's been long rumored, Stanley Works announced it has entered into a definitive agreement to buy OSI Security Devices, make of Omnilock, for an unannounced sum. Things are very vague all around. According to a press release received at our offices, but posted nowhere else on the Web (otherwise I'd link to it), this was announced Sept. 25, and it was through one of Stanley's subsidiaries. Which one is unclear. Through Mullen PR, Stanley's agency, both parties have expressed zero desire to talk about the deal. "The OSI Security Devices acquisition will enable Stanley to provide a complementary offering to customers and OEM partners," said Philip Bradney, VP of BD, in the release. "It will enable us to offer a full solution, from mechanical to online security." Stanley Works couldn't do that before? Shows how much I know. I'm sure they'll both talk more after the deal goes final. One thing I'll definitely be looking into: The press release quotes OSI CEO Dick Rasmussen, and the web site mentions a Rick Rasmussen, as VP of sales and marketing. Now, are they the same guy? Father/son? Or could they be brothers both named Richard, like in the Bob Newhart show, where Larry had a brother Darryl, and another brother Darryl?

3Q earnings round up

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Tuesday, October 2, 2007
With a number of security firms posting earnings lately, I thought a Friday round-up might be interesting: • L1's business is finally rolling like they've promised. These strike me as particularly positive developments: Revenue for the third quarter of 2007 was $115.5 million compared to $39.8 million in the third quarter of 2006, an increase of $75.7 million or 190 percent. The Company had impressive organic growth of 32 percent for the quarter. The Company’s net income in the third quarter amounted to $1.5 million, or $0.02 per diluted share, compared to a net loss of $29.3 million, or $0.66 per diluted share, in the third quarter of 2006, which included asset impairments and merger-related charges of $22.8 million. It's certainly always better to make $2 million rather than lose $29 million. • Stanley's security segment sales are up 24 percent • UTC Fire & Security's organic revenue growth in the quarter was 4%, led by Lenel, the security businesses in the Americas, and Asia. • Honeywell's income is up 14 percent, but see these paragraphs: "People might be concerned whether there is the margin potential in ACS that the company has intimated," he said. The ACS business, representing nearly 40% of Honeywell's quarterly revenue, provides technology and services to improve efficiency in manufacturing and home and building climates, as well as provides products for security and fire detection. • Brink's third-quarter revenue was $817.0 million, up 15.2% (10% on a constant currency basis) from $709.5 million in the third quarter of 2006. Operating profit increased to $60.5 million, up 11.2 % from $54.4 million in the year- ago period. • Ingersoll Rand'srevenues from continuing operations for the first nine months of 2007 have increased approximately 9 % compared with the same period of 2006, and remember that: The Company's Bobcat, Utility Equipment, Attachments and Road Development business units are now being reported as discontinued operations. It's still a good time to be a security company, but not as good as it has been.

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