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Anybody want to buy a piece of Lockheed Martin?

 - 
Thursday, September 2, 2010

PeHub via Reuters is reporting that Lockheed Martin has a couple of pieces of the couple on the auction block, including its Enterprise Integration business, which could fetch as much as $1 billion.

EIG, which provides systems engineering and integration services, has attracted interest from several private equity firms including: Kohlberg Kravis Roberts and General Atlantic; Cerberus Capital Management; and Carlyle Group, the sources said.

So, does Lockheed just not like the systems integration business right now? Hard up for cash? Hardly.

The Pentagon drafted rules last year to remove potential organizational conflicts of interest within government contractors.

That has forced many defense companies including Lockheed Martin and Northrop Grumman to divest units that offer advisory services to government agencies on platforms that they end up bidding for.

Northrop Grumman cited the same issue when it sold its TASC Inc advisory services business for $1.65 billion to KKR and General Atlantic in November.

Much of this is certainly defense-oriented, but it would be interesting to have another large private equity player in the security marketplace, as they may indeed look to delver further into commercial marketplaces to grow the business.

The GSM discussion rages on! What's next for security in the face of changing communication pathways?

 - 
Wednesday, September 1, 2010

gmssunsetIn the age of an imminent POTS sunset, Security Systems News has looked at communications pathway alternatives. We’ve looked at broadband and we’ve looked at GSM. We’ve looked at alternatives. In our rooting around and scooping we uncovered some possible disturbing truths about the current GSM communications standard. We wrote about it and we conducted a well-participated-in poll about it back in the August issue.

Over the past couple months, I’ve noticed a real discussion going on through the social media outlet LinkedIn (if you’re still sitting there thinking social media is just MySpace and for teenie-boppers to post drunken party pics and posters of their favorite hip-hop stars… well, you’re only partly right… but seriously, catch up and start taking advantage of this multifaceted business intelligence tool). The Alarm Monitoring Group, of which I’m a member has hosted a lengthy discussion of a possible GSM sunset.

Following is a rundown of the chatter.

It all started two months ago when Bold Technologies president Rod Coles asked if anyone knew anything about the possible sunset of GSM.

I have heard that GSM is going to be phased out, has anyone else heard about this. Does anyone know the time-line and how it might affect our industry?

This simple question has elicited a string of 22 responses. This is obviously an important discussion and one people care bout.

Mace CSSS’ Morgan Hertel spoke up next.

There is no defined time line but those closely connected seem to think that 2G and 2.5G will likely phase out in the next 5-7 years with 3G and 4G continuing on.

Clearly this will effect the industry to a point, but the industry needs to understand that technology is moving fast and there is no forever when it comes to communication methods, eventually we will be using IPV6, so we will have to replace the legacy ethernet, POT’s will be gone or unusable in the next 5-7 years as well.

Morgan raises a valid point about technology. We’re entering into a period where technological advances will probably outpace our marketing departments’ abilities to wring maximum ROI out of each new permutation. In geeky science fiction circles (such as the ones I inhabit in my free time), this point of exponentially increasing technological advancement is sometimes known as the singularity.

Rod came back with a valid response.

So how do you avoid paralysis? There is no wide scale alternative to GSM right now, but customers will be concerned about installing technology that will be replaced. Alarm systems have traditionally been installed and then left for decades!

I assume CDMA is going the same way?

Part of the problem here is that the security industry has grown up with a pretty much five nines dependable communications medium that hasn’t changed much till now: the PSTN and POTS service. With the communications technology continually advancing, the industry will have to develop a new business model based on upgraded tech whenever it becomes available. It means more homework for the integrator, but ultimately more contact and opportunity to prove value, as well.

Morgan responded to Rod’s concerns and addressed the quickening technological advances and the need to adapt:

Not sure how an industry evolves… We know that cell phone providers have the entire handset base change in 6 years or less, no one has a cell phone for more then a few years, in fact not many people have a TV more then that now.

The alarm industry has enjoyed a much longer time in the field, but that has to change and in many cases it has, control panels today are 25% of what they were in the 70’s and many now have modular communicators that will be field replaceable when the time comes.

Right now 2G and 2.5G GSM modules are really inexpensive but 3G modules cost more than most control panels do in the $100 range, 4G modules are over $300 even in bulk, dealers are not going to pay for these today, over time they will be cheaper because of the volume.

CDMA will move to WiMax for Sprint and LTE (Long Term Evolution) for Verizon, the good new is that these platforms will share the same hardware but will only have different software so that panel manufacturers will only have to stock 2 types of hardware.

The only other way to deal with not having to replace communication platforms will be to either invest in systems like AES or for the alarm industry to invest in satellite systems that will be up for a much longer period in time because if we continue to ride on the back of other technologies then we will have to deal with the changes and evolution that are thrown our way.

In the mean time dealers, central stations and automation vendors need to be aware of the upcoming changes and plan accordingly.

Well put, Morgan. I actually spoke with AES‘ Mike Sherman a while back and we discussed the communications pathway at length. I was actually speaking with my colleague, Martha and UP publisher Tim Purpura the other day and I was speculating that the development of a communications pathway owned and controlled by the industry and used specifically for alarm signal transmission and associated data (video, two-way voice, etc…) would maybe be the next big thing, maybe with the birth of a new association.

Monitor This! regular commenter Steve Nutt then threw in some input:

It’s strange to think that the hundreds of thousands of 2G cellular devices being installed today may have to be replaced in 5-7 years time. I’m sure a lot of customers would think twice about installing 2/2.5G cellular equipment if they knew about the looming sunset.

It’s hard to imagine that the 2G sunset will be upon us before the POTS sunset, so it’s certainly something that the security industry should be made aware of. Thanks for the Heads Up Rod - I have to admit that this was the first I had heard of it.

Roger Kay from the UK’s Northern Monitoring Services chimed in next.

It’s interesting that the big problem facing PSTN (POTS) in the UK - the BT 21 Century Network rollout - has been put on hold by BT basically because it’s too costly to implement. We’re actually seeing a small shift to Installers actually increasing their fitment of 2G GSM communicators because of the problems with round trip delay caused by Least Cost Routing and other issues on the PSTN network meaning that Digital Communicators are dialing multiple times (increasing end user telephony costs), or in some cases not connecting to the ARC’s RX’s.

To which Steve Nutt had a response…

Hi Roger,

Yes, 21CN was a flop - just like the England soccer team ;-)

Interesting how installers are using GSM as opposed to IP.

That is a good point… not about England’s soccer team, about which I know nothing, but about the tendancy toward GSM rather than IP… IP’s certainly the pathway that’s getting the most development dollars from the government.

Morgan had some things to say about the somewhat concurrent sunsetting of POTS and 2G GSM.

POT’s is already sunsetting, either by market forces or social habits but its alreay going away at 700,000 lines a month. 2G will sunset over the next 5-7 years only because as more mobile devices get out there carriers will need the spectrum to operate.

As long as manufacturers work on engineering repalceable and/or scaleable RF componants this will not be to difficult, it will be short truck roll to deal with it.

Steve came back with a question about VoIP, which many consumers are going to for phone service.

At 700,000 a month - why are we all still in the alarm business when we should be in the VoIP business?

How many landlines are still out there in the USA and how long will it take to remove them all at a rate of 700K a month?

Steve is, of course, referencing the numbers from AT&T’s report to the FCC concerning the POTS sunset timetable. Morgan raised a valid point next:

Not sure, that’s AT&T’s published number, keep in mind that this includes things like Verizon selling off residential service on the east side, and AT&T moving millions of customers to U-Verse etc.

POTS may not have an official sunset but like platform shoes its going out of style quickly.

What’s wrong with platform shoes? I’m only 5 feet 6-and-a-half inches… I need every edge I can get. Basically, though, none of us has a crystal ball. However, we can be sure that people nowadays want the “next big thing,” especially when it comes to tech.

Steve threw down next with some speculation.

As I have had more time to digest the fact that both POTS & 2G are definitely on their way out, it has started too sink in that this is HUGE for the security industry. Luckily, Dan Gelinas from Security Systems News is already onto it and I’m confident that he will not let this news drop too far from the headlines.

There are two ways that this news will be handled by the industry. Firstly, there will be people like myself, Rod, Dan, Morgan and others that will not sit comfortably with promoting a technology that is expected to sunset in 5-7 years. Then there are the ones who will see this as a money making opportunity whereby they can upgrade POTS systems with 2G systems knowing full well that they will have to upgrade them again in the not too distant future.

This is where bodies like the CSAA and others can justify their existence and educate the industry - just like they did with the AMPS sunset and when VoIP appeared on the scene.

Good points, Steve. Now is the time for all members of the industry to get informed and educated. The associations are a great place to start, as is SSN, your best bet for real news.

Morgan came back with his opinion on using soon-to-be-obsolete communications pathways and reiterated some of what I’ve already said: The industry is using someone else’s ideal communications pathway… there are going to be problems and there is going to be evolution. What the industry needs to do is get educated and communicate with the end users and take advantage of the opportunity for more contact. He also makes clear that everyone has a part to play.

I am not apposed to using 2g devices knowing they will sunset in 5-7 years, I think that would be an unfair statement, what I do think is that the alarm industry as long as they are knowingly going to be riding on someone else’s communication platform will have to understand that technology is moving quickly.

2g is evolving to 3g, 3g will evolve to 4g, IPv4 is evolving to IPv6, its all changing all time, there is no forever.

The industry enjoyed 20+ years of dialers, but the next round won’t go for 20 years, probably 10, which is why everyone needs to understand this.

Most of the manufacturers have gone back to modular communicators, so next round you will just swap that out.

Consumers are starting to understand this, that’s why they get new phones ever few years, this will just extend to the alarm communications platform.

What our industry needs to do is tell consumers the facts, that they can expect to have to upgrade the platform every 7-10 years, smart marketers will start to build this into monthly fees and loyalty programs just like the phone carriers.

Where we run into trouble as group is that many sit back and say this will never happen, they don’t plan, they don’t train and when it finally gets to the 11th hour it’s panic time.

Central stations play a big part in this but so do manufacturers, reps and other vendors.

Yours truly chimed in briefly to let the discussion contributors know SSN was, in fact on the case.

Hey guys,

interesting discussion here. (Thanks for the vote of confidence, Steve! :-)) You’ll be glad to know SSN is doing a market trends piece for the August issue on the GSM sunset, SSN/SDN executive editor Sam Pfeifle’s working tirelessly on it now.

Steve went on to agree with Morgan that the best policy is honesty… especially when dealing with the end user who’s hopefully going to continue paying you your RMR. He also mentions the exponentially increasing importance of social connection as something that will drive a failure proof communications pathway so that everyone is always connected.

That’s good Dan. Just the exposure something like this needs.

Morgan is right in that our industry needs to tell consumers the facts so that they can expect to have to upgrade the platform every 7-10 years. As long as consumers are kept informed, then there are no nasty surprises when the sunset finally comes along.

We already have a dualpath IP/3G product but with 3G rates at their current level of around $30 per month, it is not affordable for the majority of the residential sector. We advise our Dealers that it is only really useful for commercial customers that must have a redundant Internet connection for business continuity purposes. In other words, the cost of the wired DSL connection and the wireless 3G connection are valid business operational expenses and the alarm transmission paths are considered free as they just piggy back on what is in place already.

I see the potential for two things to speed the demand for 3G. The first is widespread industry adoption of video verification. As video images become a more integral part of an overall security solution, the risk of images not being able to reach the CS will become unacceptable. 3G is the most suitable backup path.

The second is a strange one - Social Networking. It is so incredibly powerful, I have a suspicion that the younger generation will soon consider a loss of Internet connectivity unacceptable and many will start using combined DSL/3G modems/routers for fear of “social suicide” (my teenage kids taught me that one).

Telular’s Shawn Welsh had a lot to say about GSM communications.

I thought I’d add this small thought to this topic. The carriers are not commenting on this topic and it is somewhat alarmist to suggest that these networks are disappearing or “sunsetting” in the US in five years.

Yes, Gordon Hope (Honeywell’s Alarmnet), in the SSN article suggested this was his opinion, but read this link, do a little extra research and form your own.

Something else to consider, the telematics and energy sectors (longer product lives than security) have all committed to using GSM in their products. Carriers would have had a very hard time selling these systems if they were preparing to shut them down in 2015.

True enough Shawn. The longevity of the pathway will most likely depend on how much money is being spent on its maintenance.

Steve addressed the situation with a few future-looking questions. He makes the point that all of this at the end of the day will be consumer driven. If the people who pay for it, don’t want it or want something different, that’s what will mater. Where the dollar’s spent will make the decision.

Fair comment Shawn, you may very well be right and 2G may hang in there for a long time to come. The truth is, none of us really know for sure.

POTS may also stick around a lot longer than we think, but because VoIP provides consumers with a much richer experience, they are not waiting to find out. The days when a Telco can dictate the terms and tell consumers to “put up or shut up” are long gone. It’s easy to vote with your feet these days.

Getting back to the future of GSM - does anyone think Google, Apple and RIM are busy thinking up ground-breaking new ways to use SMS on their phones, or developing apps targeted at GPRS?

Does anyone think that today’s 18-year-old kids will have any interest in browser-less phones that only allow you to make calls and send SMS when they are setting up businesses and buying homes within the next 5 years?

I very much doubt it. 2G may still be around, but it will be of little interest to many. Forget terrorism, or world war III - if kids are still unable to watch YouTube videos on their phones within the next few years due to bandwidth constraints, we’re all in trouble!

Whether or not the rejection of 2G will spill over to the alarm monitoring industry is anyone’s guess. My personal view is that if we ever truly get out of this recession and video verification kicks in, then the days of unsupervised, 2G cellular alarm monitoring solutions will be numbered. They will cease to provide value to the consumer.

Finally, Simon Cross from the UK’s Becatech chimed in with a challenge to see this as an opportunity. How can security totally reinvent itself?

If you think the alarm industry will have problems with the demise of 2G think of all the M2M operators out there with thousands of SIM’s managing their machines. It’s interesting that they can see whats happening. I saw a coke machine a year ago that had an Internet access screen that was delivering media messages and adverts and was an internet terminal for people to use. Also it had voip telephony and a cash machine. Now that is smart. The whole technology change had been turned into a profit engine.

What value can one add to a 3G alarm SIM. Pico cell? Internet? CCTV ? Home Automation, Weather reporting, Fully monitored 24/7 system for freezers in retail etc etc etc …..Lets get our thinking caps on and take a grudge purchase alarm system that only brings you bad news into something useful that delivers benefits through adding value.

Come on guys ….what do you think!

Rod then jumped back in and questioned the validity of phasing GSM out.

I wonder if there is a valid reason for phasing it out, i realize everything has a life cycle, but supporting old “stuff” isn’t always a problem, if you don’t change it and it doesn’t fail then whats the big deal?

For example we have just shy of 400 customers on our Alarm monitoring software, about 350 are on our Windows Manitou platform but about 50-ish are on our old legacy Theos software. I have decided to continue to support the legacy software, it doesn’t ever change so it is very stable. Ultimately the hardware is more difficult to find for it, and as the user base decreases the cost per user gets higher, ultimately there will be a point it doesn’t make sense.

So I wonder why GSM is being phased out, is the decision for technical reasons or commercial, and who ultimately has the decision to make? It can’t be because of usage, as there are millions of units.

Morgan answers that question neatly, pointing out that the winner will be the one the people want. And they vote with their money.

GSM 2.0 and 2.5 will phase out because of demand, while M2M may have have 100’s of thousands of subscribers at $3 to $5 per month the real money is in the millions of handheld users averaging a $100 a month. its not complicated math.

But to Rod’s specific question is that unlike your example with Theos, the pipe or spectrum available in very finite.

Imagine a toll road with 6 lanes, the first 4 of the lanes are dirt and mud and have lots of holes and bogs and the only vehicles that can do down those roads are big heavy slow tractors, the last two lanes are freshly paved roads, fast enough to go a 100 mph.

The consumer wants to go faster down the road, they are parking the tractors that only go 10 mph and getting sports cars. The carriers need to pave all the lanes in order to make the consumer happy and since they only get paid by the vehicle the carrier is has to pave the roads to make everyone happy,

The other problem is that the tractors cant drive on the paved roads because they slow down everyone else so ultimately if you want to take that road you will have to do it in a sports car.

This is non technical comparison but spectrum costs billions of dollars, annually and there is only so much room, just like lanes, so carriers have to follow the money to keep the consumer and stockholders happy.

Shawn agreed with Morgan, but questioned the speed with which the phase out will occur.

Morgan, I love your analogy because I just used a very close variant of it a month ago at the Rapid Response Users Group to explain this very topic. You’re right the technology is going to phase out one day and the frequencies they occupy will be needed in the future.

I just disagree on the timing.

We have over 500,000 cellular customers and we are very concerned about planning for this specific issue. Our partner, AT&T, is working on a comprehensive technology road map for their plans on each deployment’s life cycle. I can only say that currently they don’t have an official comment, but they seem to suggest the the time frame is more like 10 plus years.

My earlier comments on the telematics and energy sectors providing some protection to a sunset is that I understand they have negotiated contractual obligations for these networks to remain in operation for a specific term.

Also, Steve, your are right that people love data hungry applications; however, SMS–though it isn’t sexy–is the most successful data application in the world and is a HUGE money maker for the industry. Every specification under consideration for deployment offers support for SMS, even LTE.

Compelling words Shawn, and compelling numbers.

Regardless of when it might happen, I think the important, repeated theme here is that technological change is not only imminent, but will be ongoing and probably exponential. The best thing anyone in the industry can do is stay educated, stay involved and stay fearless in the face of evolution.

The alternative is extinction.

New president for Honeywell Security & Communications

 - 
Wednesday, September 1, 2010

Honeywell today named JoAnna Sohovich president of its Security and Communications business.

JoAnna Sohovich

JoAnna Sohovich

Sohovich is a company executive who has held positions in several of its business divisions and a former Naval officer. As president of Honeywell Security & Communications for the Americas, she will report to Ron Rothman, president of Honeywell Security Group.

From the release:

“JoAnna brings an accomplished leadership background as well as years of experience growing multiple Honeywell businesses,” Rothman said in a prepared statement. “I look forward to working with JoAnna, as we continue to introduce innovative, new products and build on the great legacy that began many years ago with the ADEMCO brand.”

Sohovich previously held positions in Honeywell Automation and Control Solutions (ACS), Honeywell Aerospace and Honeywell Specialty Materials. Most recently, Sohovich was the vice president and general manager of Commercial Control Systems, a business within Honeywell Environmental and Combustion Controls.

Sohovich served as an officer in the United States Navy and holds a bachelor’s degree from the United States Naval Academy and a master’s in business administration from Santa Clara University.

“I’m honored to lead a business with such a rich history in the security industry, and one that has long been regarded as a leader in intrusion technology,” Sohovich said in a prepared statement. “There are exciting new developments in this industry that will greatly shape the way today’s homes and businesses are secured, and I’m looking forward to working with our dealers and integrators to help usher in these new technologies.”

Honeywell Security & Communications supplies security and fire controls, sensors and alarm communications products designed to help security dealers design end-to-end solutions for a wide range of residential and commercial customers.

I’ve got a call into Honeywell requesting an interview with Sohovich.

Will 3M have a rival for Cogent?

 - 
Wednesday, September 1, 2010

Good article from Lou Whiteman at theDeal.com today looking at whether 3M is likely to have competition for buying Cogent.

It seems that investors are actually paying more right now for Cogent stock than 3M is actually offering, meaning they’d lose money if the 3M deal went through. That’s some interesting Wall Street gambling.

Where’s the thought coming from?

The deal values Cogent at about 8.5 times 2010 expected Ebitda and 7.1 times 2011 estimates. Raymond James & Associates Inc. analyst Brian Gesuale notes that Cogent rival L-1 Identity Solutions Inc. (NYSE:ID), which put itself on the block earlier this year and could announce a deal in the coming days, is trading at 11 times its expected 2011 Ebitda, leading Gesuale to believe that either L-1 is overpriced or that the 3M offer undervalues Cogent.

Could be the former, though, right? L-1’s stock price is at least somewhat inflated by the idea that it’s for sale.

“At first blush, 3M’s offer appears light given the range of public takeout multiples in the government technology space this year at 9-14x forward EV/Ebitda,” Gesuale wrote in a note to investors. “The firm’s proprietary technology, leadership status in a growing [automated fingerprint identification] industry with high barriers to entry, and recent list of wins leads us to believe a higher acceptable takeout price is warranted.”

I guess that makes sense, but isn’t it also true that DHS represents a huge portion of Cogent’s business and that they’re not going to go on buying fingerprint readers forever?

So, who are these potential suitors?

The article mentions L-3 Communications Holdings Inc., Northrop Grumman Corp., SAIC Inc., and Honeywell. Not sure why they didn’t just throw Boeing and Lockheed in there, since they’re basically just listing big companies that work with the government and could afford Cogent. I would be kind of shocked if Honeywell went in that direction, since Cogent professes in its SEC statements that just about all of its business is in government and law enforcement, and Honeywell doesn’t play there all that much, but maybe they’d see it as a way to get further into the government market.

I certainly wouldn’t mind a little bidding war. It would make things more interesting, anyway.

P.s.: Just noticed that 3M is gobbling up other companies, too. PeHub has 3M buying a people-monitoring firm from Israel, Attenti Holdings, as well, for $230 million. I guess when you’re sitting on $5 billion in cash, you can do some shopping.

False alarm reduction efforts tweeting your way?

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Monday, August 30, 2010

siac_logo_new-300x144Just got an email (via my colleague Martha) from Shane Sumrow over at The Margulies Communications Group.

Looks like SIAC’s stepping up its social media networking endeavors in its efforts to combat false dispatches.

I can vouch for the veracity of the stepped up LinkedIn presence, as I just got linked to SIAC’s Stan Martin this morning. Well done guys.

From the SIAC release:

The Security Industry Alarm Coalition (SIAC) is stepping up its efforts to reach law enforcement, citizens and companies in the security industry by adopting several new social media tools. As part of its outreach program, SIAC is now plugged into three social networking tools – Twitter, LinkedIn and WordPress. Short messages will be frequently delivered via Twitter. LinkedIn will connect users with SIAC services. At WordPress, SIAC will blog on successful alarm reduction techniques and invite discussion and comments from viewers.

I’ve sort of been doing that for SIAC, too, by the way. I’ve written numerous stories and blog posts about false alarm reduction efforts and about SIAC.

It’s nice to be connected to Stan, finally, I must admit.

Check out their efforts and keep up with important world of false alarm reduction.

“We’re tremendously excited about where we’re headed and the value we provide our sponsors, local communities and the security industry. These new social media tools will help us educate key individuals and organizations on alarm management issues, and increase our investment in proven solutions,” Stan said in the release.

Follow SIAC on Twitter!

Get connected to SIAC through LinkedIn!

Read about false alarm reduction efforts at SIAC’s blog!

3M making biometrics play

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Monday, August 30, 2010

3M announced this morning an agreement to by Cogent, a maker of biometrics products, for $943 million (the press release says when you back out what Cogent has in cash, it’s really only a $430 million outlay, but I’m only seeing $272 million in cash and investments on the most recent 10k, so I’m not sure where that number is coming from).

Cogent does “finger, palm, face and iris biometric systems for governments, law enforcement agencies, and commercial enterprises,” though I’ll admit I haven’t seen them much at the shows or through press releases. Don’t know much about them. Maybe that “commercial enterprises” thing is wishful thinking. In the Cogent SEC filings, they say, “We market our solutions primarily to U.S. and foreign government agencies and law enforcement agencies.”

I don’t think many of you readers are installing Cogent products.

As for 3M, usually they call me to talk about the security film that they put on monitor screens that makes it so someone else can’t peek at what you’re working on on the plane - not exactly an integrator’s dream product to carry. However, they do have a significant security business (find their most recent 10k here), doing lots of ID stuff to the tune of about $3 billion a year, and they’ve got $3 billion in cash, so they can throw it around a bit.

Also, they pay a $1 a share in dividends. Not too shabby!

Cogent looks like a pretty healthy company, except that all of its numbers are going the wrong way. Sure, they cleared $7.7 million in net income on $49.8 million in revenues for the first six months of 2010, for a tidy 15.5 percent net margin (good!), but those revenues are down from $62.8 million in the same period last year (bad!).

Net profit is down 55 percent (yikes!). Gross profit is down 37 percent (still kind of yikes).

Despite that 3M is still paying about 15 percent of a premium to buy up the shares. And that seems like quite a lot considering Cogent did, indeed, do $130 million in 2009, but isn’t exactly on pace for that in 2010. Is 3M really paying almost a billion dollars (sort of) for a company that might not do $100 million in revenue in 2010?

3M could be looking at the fact that while product revenues have dropped significantly for Cogent, maintenance and service revenues are actually up. That might tell them the business is growing and that government orders of biometric products are bound to be lumpy.

Cogent got 54 percent of its business from one customer in 2009, with that same customer contributing just 25 percent of revenue in 2010.

And that customer is DHS:

The most significant portion of our revenues in the most recent three fiscal years has been derived from sales to the DHS. The DHS uses our solutions in connection with the implementation of the United States Visitor and Immigrant Status Indicator Technology, or US-VISIT, program. We anticipate that the DHS will account for a significant portion of our revenues for the foreseeable future. We do not have any long-term contracts with any of our customers, including the DHS, for the sale of our products, and our future sales will depend upon the receipt of new orders. Any delay or other change in the rollout of US-VISIT or any failure to obtain new orders from the DHS could cause our revenues to fall short of our expectations.

If you look closely at the filing, too, you can see Northrup will be buying at least $5 million in products a year for the next four years, so there’s another little base, anyway.

Service revenue doesn’t exactly lead to better margins for manufacturers, though. The gross margin dropped from 62.8 percent in 2009 to 49.8 percent in 2010, though that could just be attributable to revenues dropping but overhead not moving much. Something led to them burning through $40 million in cash over the past 12 months.

Was 3M also looking at L-1? What does this do to L-1’s valuation?

Which security/telco collaboration will work?

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Monday, August 30, 2010

Here’s a story I saw this morning from the Austin American-Statesman about uControl getting funding. The funding is something I reported on a couple weeks ago in a story I wrote called The telcos are coming!

This story included something interesting that my story didn’t touch on, some quotes from ABI research about partnerships between home security providers and telcos. His story quotes an ABI analyst saying the company who partners first, will win the race. Further, he identifies uControl’s rivals as iControl and 4Home.

Sam Lucero, an analyst for New York-based ABI Research, said cable companies are under pressure to increase revenue by delivering new services, and reselling home security is a natural fit.

“In addition to a new revenue stream, it creates an incentive for customers to stay with their provider,” Lucero says. “The more services you get from one provider, the less likely you are to go through the hassle of switching.”

Lucero ranks uControl as a front-runner, but he said it will be challenged by a handful of rivals, including iControl Networks Inc. of Palo Alto, Calif., and 4Home Inc., which is based in Sunnyvale, Calif., and backed by Verizon Wireless.

“They’re are all relatively small privately held companies, so the test will be who can establish partnerships with the big cable and Internet service providers first,” Lucero says. “To succeed, you’ll have to be part of substantial networks.”

UControl says it has signed deals with three regional telecommunications players and three national players, whose names will be disclosed as they begin offering home security this fall.

While I think Luceros’ take is interesting, when I was reading this story, I thought of InGrid (which is now called Lifeshield and has taken a direct-to-consumer tack) which was talking up partnerships with cable companies a couple years ago. Here a story I wrote about that in 2008.

As far as I know, InGrid only announced partnerships with regional cable companies, not national cable companies. However, those partnerships did not succeed the way InGrid had anticipated, and as I mentioned above, InGrid now Lifeshield is now going direct-to-consumer.

There are a variety of reasons why previous go-rounds with cable companies didn’t work out. UControl, for example, says that it wasn’t ready to partner with cable companies until recently. It is just now ready to offer cable company partners the support and platform they need to succeed in security.

I’m not trying to insinuate that partnerships with cable companies won’t work. There seems to be a strong argument that they can work. It does seems to me that he who partners first may not necessarily win the race.

Back to school and back home again

 - 
Friday, August 27, 2010

Just in time for back to school, alarm.com has introduced a new “no show” feature.

Alarm.com, a provider of wireless and web-enabled security and activity-monitoring technology, says the new alert is perfect for parents who want to know if their kids didn’t arrive home from school at the expected time.

The alerts (via email or text message) are sent to alarm.com customers and can also be useful for “monitoring the arrival of of housekeepers or pet sitters as well.”

Customers can also be notified if their system is already disarmed when a scheduled time frame begins.

Good Morning America isn’t very impressed with you

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Wednesday, August 25, 2010

People have been sending this story from Good Morning America, about a guy who watched his home get burglarized on his iPhone, all around the Internets. And, I guess, if you’re not in the industry it does seem kind of cool.

Wowzer! You can watch video on your iPhone?!?

Considering I can uStream with my iPhone and people can watch whatever I’m doing live on their computers and there’s face-to-face now, etc., I’m not sure why this is so impressive, but there’s a good human interest story, what with the pumping gas aspect and the great story of the robbers trying to throw the brick through the window.

But what should be actually worrisome for the industry is how casually the security industry is completely ignored on the second page once the GMA technology expert person is called in.

Becky Worley walks you through the steps of setting up this iCam app, then finishes with:

The program lets you stream video and audio from up to four computer webcams at the same.

The downside to this system is that it uses computer webcams, which makes it difficult to use the computer for other purposes.

How many people are rocking four computers in their house? Maybe lots nowadays, but I’d say that’s a pretty significant downside. In our house, you’d get a great visual of the bookcase in front of where my computer is, but you could rob 95 percent of my house blind without the webcam noticing anything. I suppose you could reposition it as you leave the house… Still, not exactly overly practical.

I think there’s something that GMA is not telling us about the “elaborate” security system that this guy is using to monitor his home.

But Becky does offer us another option:

Another option, which will free up all of the computers in your home, is the Dropcam Wi-Fi security camera.

For about $200 and a $10 monthly fee, all you need is Wi-Fi to monitor your house from anywhere in the world, using your computer or mobile device.

Motions trigger alerts, which are sent to you via text or e-mail. Then you can watch the video from your phone. The interface is dead simple and takes only five minutes to setup.

How about, oh, I don’t know, Total Connect? Or any of a dozen other residential video solutions that are now available via iPhone app? Nope, not a mention. It’s taken as OBVIOUS that you would just set this up yourself and monitor it yourself. There’s no hint that you’d maybe want a security company involved.

Do I think that most people would currently choose the DIY route over monitored security systems? No. But I do think that this idea is creeping ever steadily into the mainstream, and the fact that an event like this garners so much publicity, but so little attention for the security industry, which has been offering this capability for years, should be seriously concerning.

When the mainstream thinks about security, they think about ADT and Broadview (still) and scary white men in black hoodies that trip your alarm so that charming young men can call your house. But if you want to monitor your home with video on your iPhone. Oh, just buy a web cam for that.

New HQ for ADT?

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Wednesday, August 25, 2010

I saw this story today in the South Florida Business Journal which talks about ADT/Tyco seeking $1.6 million in incentives to stay put in South Florida.

From the story:

The proposal for Qualified Target Industry and Quick Action Closing Fund money was originally on the Palm Beach County Commission’s Aug. 17 agenda, but was removed because the incentive contract is still in negotiations between the company and the county, Palm Beach County Economic Development Director Sherry Howard said.

Although the deal isn’t finalized, Tyco and ADT appear likely to leave their offices at 1 Town Center Road to find a building that’s a better fit, Howard said. The company is also weighing relocating to Texas or New Jersey, where it also has a corporate office in Princeton.

The story quotes an unnamed source who says that ADT is “negotiating a lease deal at 1501 Yamato Road, which formerly hosted a Washington Mutual Bank operations office.”

That’ office is in the neighborhood of some of Tyco’s other offices.

I called ADT spokeswoman Ann Lindstrom and she confirmed that ADT is currently in the process of negotiating a lease for “a building near our current location in Boca Raton,” but noted that until those negotiations are complete, and a final determination has been made, “it would not be appropriate to provide further details.”

She did say that “Tyco and ADT are constantly looking at alternatives available in the real estate market to assure we operate our business in the most cost-effective and space efficient way possible. This includes asking municipal bodies for economic incentives to retain our presence in Florida.”

I asked if possible relocations were related in anyway to the Broadview acquisition. Lindstrom said that prior to the Broadview acquisition, ADT had “undertaken a strategic review of its real estate needs for the next 3 to 5 years. This review indicated that for ADT to continue to grow and meet the needs of customers, capacity would need to be added at the corporate headquarters.”

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