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3Q earnings round up

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Friday, November 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.

CEDIA cancels spring EXPO

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Monday, October 29, 2007
Hey folks, sorry I haven't been posting for a few days. I took a vacation to see the in-laws in Ohio and blogging while vacationing is apparently not recommended by 9 out of 10 mental health practicioners. By the way, the in-laws live in a brand-new home in one of those brand-new developments. They have a Brink's panel installed, but they never activated it. However, they have about every home automation product you can imagine, and they use all of those, hooked up through three networked flat-panel TVs. Something about that seems telling. Maybe it's telling me that I should pay more attention to what the folks at CEDIA are up to, as they are in the home like security firms are, just doing different things. I thought things were going hot blazes with CEDIA members, so this news was surprising. To quote: Though there was support for the recently announced Spring EXPO concept initially, member feedback regarding market condition changes and other factors have prompted CEDIA to step back from Spring EXPO at this time and focus on education and expanding the exposure opportunities with architects, builders and interior designers at the third annual Electronic Lifestyles Forum. I'm guessing the downturn in the new home building market is the "market condition changes" part of that statement, which is understandable. But why is this market so dependent on the new builds? If home automation isn't for people like me, who live in houses built in the 1800s, there's an obvious limit to market penetration. Us New Englanders like cool gadgets, too.

Making no-response lemonade

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Thursday, October 25, 2007
After 24 hours getting back to the East Coast from the CSAA show in Hawaii, it's ironic that this article about the consequences of Fontana, California's verified response policy should come across my desk (that desk being in the Newark airport). Wednesday, I sat on a panel with other journalists and was asked if I thought verified response would take hold nationally. I said it was my opinion that public relations nightmares with burglars confronting store- and homeowners in the act of verifying alarms (as happened here in Dallas) would make an increase of fines much more likely, which is the trend we're seeing nationally with our alarm ordinance watch column. I think this article backs me up. Note: Last year the Fontana Police Department responded to more than 8,500 burglar alarm calls -- an average of about 24 a day. More than 99 percent of them proved to be false alarms -- a tremendous waste of money and resources, said Lone Star Security Regional Manager Bruce Boyer. Notwithstanding the overuse of the m-dash in those sentences -- fair enough. Boyer asked: Why have high-trained, highly-skilled police officers responding to burglary alarms when their time could be put to much better use? This, however, is not the next logical question. Why aren't they instead asking how to eliminate the false alarms? Why aren't they talking about enhanced call verification or a CP-01 standard panel? They probably do that later, right? Not so much. Anyway, Fontanta passed a verified response law that went effective Oct. 1, and here are some opinions: And that's important to Gerry Herrera, storeowner and manager of Sonora Tire Shop. "We want a security company coming out and checking on the place," he said. Makes sense. I don't want to go burglar-hunting either. For Mini Perez, Sonora's chief financial officer, the P.D.'s change of policy makes sense. "It's less taxpayer expense," she said. "It was a waste of time for the police coming out. It should be the responsibility of the alarm company to provide the service. Police have better things to do." Aack! Are you people reading this? The police have better things to do than respond to alarms and make sure people are safe? That kind of opinion on the part of the city can only be the result of terrible mismanagement by local alarm companies. Sorry guys. How can it get to the point where you're officially the boys that cry wolf? It's no wonder Lone Star Security has been able to capitalize by offering to "come in and use the existing alarm system" and add on an in-house guard service. (Which is code for come in and get people to break their contract, right? Not that I'm saying I don't understand the business model, just trying to be clear.) Here's Boyer again: "The Police Department is right. It's the alarm company's responsibility to investigate," he said. "The Police Department has better use for its officers. Cops are highly trained to do dozens of jobs. We are trained to do one thing well -- respond." This guy has completely won the marketing battle. By framing the question as, "Do you want to waste police officers' time?," he's gotten the answer he's looking for: "Of course not. Can we pay you to verify our alarms?" He talks about being partners with the police department, and there is some sense to his policy of alerting the cops that they're responding, kind of a back door dispatch. That's a good thing, but I'm troubled by this part: The gun stays in the holster and only comes out when an officer faces deadly force. And that deadly force must have the ability to deliver it against an officer or customer, said Boyer. "If the deadly force is across the street holding a knife, the gun stays in the holster," he said. "Our job is to investigate alarm calls. If there's criminal activity, we call the cops. We are not Rambo." Well, not only are you not Rambo, you are also not a police officer. Let's hope deadly force is never used, but it's hard to rely on hope in that potential situation. You think people are upset about Blackwater shooting innocent Iraqis (I gave you an Irish link, for non-US perspective)? What happens to a community when a private security company shoots a kid reaching for a cell phone? If a police officer does that, it's one thing. In this case he was placed on leave. I think it's a very different situation if it's a private security officer, where the city doesn't have recourse and the company is not accountable to the citizens. All of this tells me that alarm companies have to make sure their communities don't get to the point where they think they're just crying wolf, and they need to work on programs like those developed by SIAC to work with states on enhanced call verification and CP-01.

Tuesday at CSAA

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Tuesday, October 23, 2007
Well, the party a Turtle Point last night was really boffo or groovy or some other '60s term for good. A 10-piece band entertained CSAA members and spouses while most people took the opportunity to avoid talking business for at least a few hours. Very few hijinks ensued. Sorry, no good gossip. This morning was the real meat of the conference, with presenations that got to the heart of members' concerns. Mitchell, Silberberg & Knupp's Alan Pepper gave a sobering presentation on privacy, which, when doubled with Michael Kelly's presentation on insuring against liability in the digital age, sure made me want to go buy a paper shredder. In fact, the day was full of scare tactics, as Gordon Hope from Honeywell presented a chilling picture of the rapid evolution of the communications devices that will be employed by the alarm industry going forward, and John Lombardi (CIA Security), Shane Clary (Bay Alarm), Lou Fiore (AAIC), and Bob Bonifas (Alarm Detection Systems) put forward a call to arms, trying to generate participation in the NFPA standards-creation process. "Where will architects and engineers and code enforcement officers turn for security standards?" Lombardi asked. "To NFPA 731. The NFPA is simply where they go for standards." Now is the time to pay attention. You can track the standard's progress, and that of others vital to the industry, like NFPA 72 and 720, here. The rest of the day was spent golfing and sailing, though I, your dutiful scribe, spent the rest of the day working, of course. Tomorrow I get up on the dais. We'll see what happens.

Lovin' the Hawaii sun

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Monday, October 22, 2007
If there's one thing the CSAA knows how to do, it's pick a spot for the annual meeting. Last year, I couldn't quite make it to Rome, but CSAA educational chair John Lombardi, who owns CIA Security in New York, invited me to speak on a panel focusing on the central station of the future, and it was mighty hard to turn down a trip to Hawaii (though I did grouse about the long plane ride quite a bit around the office). Turns out, the plane ride was, indeed, terrible - 10 hours from Newark to Honolulu with an hour-long flight on the front and back end, from Portland and to Kona, respectively. But the reward sure is nice. The Fairmont Orchid is a first-class resort, where you can swim with the turtles and spend a seriously excellent afternoon watching the Red Sox win game 7 of the ALCS. Monday, the events start and I'll give you a few more details. Aloha.

CSAA gets down to business

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Monday, October 22, 2007
Following soon after treasurer Daniel Demers' (Reliance Protectron) report that the CSAA now has a year's worth of dues in reserve, it was hardly a surprise to hear that next year's annual meeting will be at the Ritz Carlton Grand Cayman, and that they'll travel to Athens, Greece, in 2009. Still, the 150 members in attendance here were all business this morning, toiling through a business meeting run by CSAA outgoing president John Murphy (Vector Security) that also saw presentations from NBFAA president George Gunning (USA Alarm Systems) and newly elected SIA president Wendy Diddell (Richardson Electronics/ADI). Some notable items: • Everyone moved up one step on the chain of command: Bud Wulforst (A-1 Security) moved from vice president to president, Ed Bonifas (Alarm Detection Systems) from second VP to VP, Bob Bean (Alert Alarm) from secretary to second VP, John Lombardi (CIA Security) from assistant secretary to secretary, with Pam Petrow (Vector Security) stepping into the assistant secretary's role. Demers will continue as treasurer. • Executive director Steve Doyle announced plans for a new web site to be launched this year, which will offer five languages of translation. This is partly due to an increased interest by foreign counties in the CSAA programs. Did you know Brazil alone has 2000 centrals? That was schocking to me. • Stan Martin, executive director of SIAC, outlined a number of efforts for false alarm reduction, including www.pleaserespond.org, where you can download any number of tools for fighting verification efforts in your home town. • There was discussion of the legal implications of the AMPS sunset. Specifically, could you be punished by the FCC for not notifying your customers of the sunset? Probably not, since centrals are commonly believed to exist as end users and not carriers, and the FCC only has jurisdiction over carriers, but it's better not to test it. If some event happens where the analog backup doesn't work following the sunset and you've neglected to alert your customers, however, it's likely you'd be liable for damages, so there's another good reason to get the word out. • There are now more than 80 Five Diamond certified central stations, those that have lived up to a number of CSAA requirements and have had all of their operators trained. Following the business meeting, Ed Turzanski, senior fellow, Center for Terrorism, Counter-Terrorism and Homeland Security, at the Foreign Policy Research Institute, delivered a keynote address that outlined a plan for winning the war on Islamic extremists that resonated strongly with the members, even if it touched only slightly on the sort of security practiced by alarm dealers. If anything, the most relevant portion of the keynote dealt with encouraging energy independance and conservation and breaking our ties with Middle East oil supplies. Then, with that presentation pushing the conference a half-hour behind schedule, the heads of AHJs APCO, the International Association of Fire Chiefs, the International Association of Chiefs of Police, and the National Sheriff's Association outlined their goals for the coming year, and how the CSAA might be able to collaborate in accomplishing some of those goals. Finally, Chief Harlin McEwan, chair of the communication and technology committee for the IACP, spoke about the impending national wireless public safety broadband network and the very interesting Public Safety Spectrum Trust, a new non-profit organization that will hold the license to a very powerful piece of wireless real estate. How this will affect the security industry remains to be seen. With that completed, attendess dispersed for lunch, next to meet at the Turtle Point Beach Party. I'll have a report of those activities anon.

UL to release findings from smoke characterization study at Nov. 14-15 seminar

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Friday, October 19, 2007
Underwriters Lab is holding a seminar Nov. 14-15 to talk about findings from its UL-Fire Protection Research Foundation Smoke Characterization Project. What's smoke characterization you ask? Well, UL along with some manufacturing partners--GE among them--conducted a research study on fire and smoke and "in particular, the particles and gases that make up smoke," according to UL's press release. In some ways, this seminar seems aimed at fire marshals, fire chiefs and other pubic officials, however, there looks to be plenty of interest for those of you who make and install fire systems. For example: UL's findings on the responsiveness of different kinds of smoke alarms; current issues related to smoke alarm operations; engineering trends in smoke alarm designs and fire detection technology and what's going on with codes related to this equipment. UL's got an impressive line-up of speakers from NIST, NFPA, Centers for Disease Control, the University of Maryland, and UL itself. The seminar ($199) will take place at the Westin Hotel ($169 per night for seminar attendees) in Lombard,Ill.(a half an hour from O'Hare). The program also includes a tour on Wednesday of UL and a fire and smoke demo.

Brink's loses court case in Washington

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Friday, October 19, 2007
In a ruling that could have a major impact on the residential market, especially, Curt Woodward at the Olympian reports today that the state Supreme Court has ruled in favor of 70 Brink's Home Security techs who say they deserve to be paid for their trips from home to the job site and from the job site home each day. Per the story: The majority opinion, written by Justice Susan Owens, said the technicians were clearly on duty and in a prescribed workplace while driving the company trucks - satisfying state rules that define working hours. ... The court's two dissenters, Justices Richard Sanders and James Johnson, said the technicians weren't on the clock because the company trucks aren't necessarily a workplace. The Brink's technicians, Sanders pointed out, didn't claim they were entitled to pay when driving a work truck to the company office - only when they were driving to and from a job site. "Here, the technicians' principal work consists of installing and repairing alarm systems in customers' homes," Sanders wrote. "Hence, this work is done only at the homes of the customers and not while commuting." There's, of course, no reaction from Brink's or interviews with any industry observers, or even HR lawyers, to talk about the impact this decision might have. We're going to get cracking, however, calling people to find out what this case, which has been rumbling through the legal system since 2002, means for the security biz.

Axis IP cost study seems genuine

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Thursday, October 18, 2007
IP camera maker Axis Communications is making a fair amount of hay with their ASIS show-released study showing that the total cost of ownership for a 40-camera system, installed in a school with no current network or camera system, is less for an IP system than for a traditional analog system. This, of course, runs contrary to common beliefs: Analog cameras are inexpensive; IP cameras are expensive! Everyone knows that! Okay, maybe that's not industry mantra anymore, but I think there's still some skepticism about an IP camera manufacturer's study showing IP systems are cheaper. But I'm a believer. I called Chris Humphrey, principal of his own Independent Security & Networking Market Research and the indepedent researcher who conducted the study for Axis, and he didn't seem to have any allegiance to Axis and said all the right things: "I approached [integrators] with the idea that I was doing independent research and that if it comes out unfavorable for Axis, it's okay. I wanted as candid feedback as possible, so I kept everyone anonymous." "Everyone was real receptive, saying they'd love to see a study like this, but they said that it would be hard not to make it seem vendor biased. When I did talk to Axis, they were pretty cool about saying that it's cool if it doesn't come out so good for them." Humphrey has a background in security and IT, and seems knowledgable about the market without having preconceived notions. He's very thoughtful and I trust his findings after speaking with him about his methodology. I think his study is a major selling point for IP systems and I'll be interested as to whether other IP camera manufacturers independently tout Axis' findings. It's in their best interest, but they'd be implicitly endorsing Axis along the way. Hey, IP's all about working together, right?

Cross Match to offer IPO

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Wednesday, October 17, 2007
In a time where Sarbanes-Oxley and other headaches associated with being a public company are leading a trend toward privatization, it's notable that Cross Match Technologies, which makes an FBI-accepted/SAFETY Act-approved fingerprint capture and read technology, among other biometrics, announced today it will go forward with an initial public offering. They'll be pushing 9,420,290 shares of common stock, 8,333,334 of them primary. No pricing has been discussed yet. That will be handled by W.r. Hambrecht + Co.'s OpenIPO auction process. You can get a prospectus by emailing info@wrhambrecht.com. I'm hoping to talk to someone at Cross Match today and to have more information in our newswire tomorrow. What I do know is that they first announced intentions for the IPO in April, then postponed due to market conditions in August, and now have revived intentions. Is it interesting that Credit Suisse was going to act as the bookrunner, with USB, Morgan Stanley, and Raymond James co-managing, and now it's going to be led by Hambrecht, with Stanford Group and E*Trade comanaging? I don't really know.

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