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The Inc. 500 - A security analysis

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Thursday, August 20, 2009
A couple days back, I sort of mocked Somerset for this line in its press release about its earnings: "the exponential growth in concern and demand for security." But then I started feeling a little guilty about that. I mean, security is outpacing other industries, right? Right? Isn't that what everybody says - security is a safe harbor in the financial storm? So, I thought to myself, since security is dominated by private companies, with a lot of technology start-ups, surely security is well represented on the Inc. 500, a list of the fastest growing public companies in the country. Surely! Well, not so much. Any security companies in the top 50? Well, there's Ahura Scientific, at #25, which "develops rugged, compact optical systems for rapid identification and verification of liquid and solid chemicals. Applications include environmental testing, detection of pharmaceutical counterfeits, sampling of potential liquid explosives at airport checkpoints, and medical diagnostic tools." I think that definitely counts as security. They did went from $990,198 in 2005 to $46.2 million in 2008. Not too shabby. Of course, I've never actually heard of them. Which is probably on me. Moving on: The ID Experts come in at #32. They don't really count for my purposes, though, since they're all about identity theft, and I'm going to put that out of the realm of physical security, which is the type of security that's supposedly going through the exponential growth, and none of you readers really deal much with identity theft. But then to find anything even close you've got to go to #164 for Packet360, which isn't really a security company, but at least plays in the security realm, dealing in wireless backbones. I don't think that really counts, but at least I've seen a press release from them. At #180 we've got GuardianEdge, which sounds like a security company, but just does data encryption. Doesn't count. At #238 we've got elQNetworks, which, as you might think, does network and data security. Doesn't count. Finally, at #242 there is a legitimate security company working in physical security, doing threat assessments, integration, etc. Ever heard of Hilliard Heintze? The do this: "Emergency preparedness, crisis and disaster recovery planning and management, background screening, computer forensics, and security staffing for corporate functions are among its core competencies." Maybe you haven't heard of them because they only grossed $4 million last year, and are on the list because they started out at $400,000 in 2005. Remember, this is about growth. Still, a company I should at least know about. They are followed at #243 by Bargain Locks. No explanation necessary. Still, proof of growth in the demand for security, no doubt. And at #305 we have our first traditional security company, Power Home Technologies, which installs alarm systems and CCTV in homes and small businesses, based in North Carolina. They're a Vector dealer, and they've got a snazzy web site, and they grew from $1.1 million in 2005 to $9.6 million in 2008. Now THAT'S what I'm looking for. That's some exponential growth, right there - 781 percent growth. And, yet, it ranks #305 overall. Hmmm. I think Premier Integrity Solutions counts, too, at #313. They do drug testing, but also criminal monitoring, etc., which is physical security in general. It counts. But they probably don't read my paper. Oh, hey, WOW, Devcon is at #329! Oh, wait, that's not the same Devcon... Psyche! A guard firm, Securit, comes in at #367. Not bad. They do background checking and such, too. One hundred and eighteen employees on only $5 million in revenue? Yep, that's a guard firm. ESET, at #379, is a spyware blocker. Doesn't count. We've been talking about this potential growth of video monitoring - well, iVerify is actually putting up the numbers. They clock in at #405, going from $1.2 million to $9.1 million, 2005 to 2008. That is a terrific vindicator of the model, if you ask me. To quote them, "The company's audio and video monitoring center houses specialists who oversee the security of clients' employees, critical assets, inventory, entryways, cash registers, and other high-risk targets." 637 percent growth is nice. And, oh my stars and garters (boy is that a weird saying), there's a video systems manufacturer here, too, Luxor Direct, at #460. They do: "Luxor sells surveillance and security DVR technology for homes and businesses throughout the U.S. and Canada. The company is currently expanding its markets and its product line in anticipation of future growth." I have not heard of Luxor before, but they're an OEM, so it's not that surprising. They use proprietary "ClearPix" compression, which they claim is better than H.264, et al. Still, something's going right: They went from $844,000 to $5.6 million in three years. And that's it, for the top 500. So what conclusions can we draw? Maybe not many. The 500 companies on this list grew ridiculously fast, even if they didn't really get hit by the economic slide till the end of the reporting period. The 500th company grew 528.5 percent. Who can do that? Well, only little start-ups, mostly. Those that can go from something in the hundreds of thousands to something in the millions in three years. They're start-ups, most of them. Legacy companies like Pelco aren't going to be on the list because growing that fast would mean going from $300 million to $1.5 billion (although TV maker Vizio is on the list, with 2008 revenues of $2 billion, so it's not impossible to do that). Further, some of the most innovative young companies in security, especially in manufacturing, are overseas, and this is an American list, so there's that. However, that said, it's not like there aren't a lot of start-ups in security. All of the PSIM companies, IP camera companies, IT-savvy integrators, video management software companies, analytics companies, etc., are start-ups, sort of by definition. Where are they on this list? Shouldn't one of them gone from $500,000 to $5 million? Maybe they just didn't fill out the survey, or submit their financials. Security companies are conservative by nature. Maybe Inc. just didn't explore the security industry very thoroughly. But if that's so, it's emblematic of security's lack of visibility in the mainstream consciousness, which I have maintained all along is a problem. Clearly, there are companies growing fast in this market, but when you compare security to industries like government services (where there may be some overlap, but I didn't see much), media, consumer goods, even retail, security gets smoked. Why is that?

Do analytics work?

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Wednesday, August 19, 2009
Well, of course they do. And don't. It depends on what your definition of work is. Anyway, John Honovich is exploring the topic, with attendant poll, and you can see my comments on the matter at his site.

'Have I got a great stock for you!'

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Wednesday, August 19, 2009
Here's a story/sales pitch from The Motley Fool, by Todd Wenning, which recommends "Brink's Home Security" as a good investment. It a lengthy pitch, so I worked up a handy summary for you: --Fewer small cap stocks are being followed by Wall Street investors and that's generally bad for the companies, 'cause it makes it harder for those companies to get cash. --Some small cap holdings are very good--or will be in the future if they are: small, "underfollowed" [that's Wall Street for not a lot of analysts are paying attention to the stock] , financially strong, well managed, and, dominant in their market niche. --Motley Fool co-advisors Seth Jayson and Andy Cross use this very criteria to pick out stocks for Motley Fool "Hidden Gems" subscribers. From the story:
One stock the team feels fits the profile is Brink's Home Security, provider of home security systems to more than 1.3 million customers. The recent spin-off from The Brink's Co. only has eight analysts following it, but has a strong balance sheet, is free-cash-flow positive, and has a high level of recurring revenue.
I would agree that the company meets the five criteria, but jeez, don't Seth and Andy know the name of the stock they're recommending for Pete's sake? As my loyal readers know, it's not Brink's Home Security anymore, it's Broadview Security... stock symbol CFL... Want details on the name change and how it'll affect the company? Read all about it right here. Want to know what an analyst who's been following Broadview/Brink's for 20 years thinks? Then click here. For the longer version of Todd's story, click here.

3VR gets another $12m in funding

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Wednesday, August 19, 2009
Seems people with money are still interested in betting on the future of video analytics and facial recognition. 3VR announced today another $12 million funding round, which brings their total raised to somewhere north of $40 million or so. This is what the new board member/investor has to say about it:
“In 3VR, you have a company that is offering new levels of innovation while continuing to provide its customers with the industry’s most sophisticated video management platform overall,” said Sonia Hoel Perkins, managing director at Menlo Ventures. “We have been impressed with 3VR’s incredible momentum, upside potential and ability to deliver completely unique technology in a broad and fast-growing market."
I'll have a story for the wire tomorrow, hopefully.

Clearly, no one offers IP, cellular, or GSM radio security solutions, right? It's all POTS, right?

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Wednesday, August 19, 2009
I came across this blog post in my Google Alerts this morning. Someone needs to give this guy a call and let him know how they can help him. I've only been covering the security industry for a little less than a year, but it seems to me that there has to be lots of options out there.

I was hoping the payoff on this would be bigger

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Wednesday, August 19, 2009
I got pretty excited when I heard about the arrest of the "Winnie the Pooh Bandit" today. I figured that's got to be a great story, but I was a little let down. Basically, he's just some scumbag with pitbulls who's been in jail before and robbed three banks for a total of $5,000 or so. As my daughter would say, "Borrrring." I was really hoping for a thoughtful, kind-hearted, Tao of Pooh kind of bank robber. But, no, he just was wearing a Pooh T-shirt one time. The good news? They bagged him thanks to surveillance footage that was released. Someone recognized him and ratted him out. Score points for cameras. The bad news? He didn't say to his arresting officer, by way of explanation for his deeds, "Did you ever stop to think, and forget to start again?" Nor, while robbing them, did he offer to bank patrons, "Don't underestimate the value of Doing Nothing, of just going along, listening to all the things you can't hear, and not bothering." Because that would have been kind of awesome.

Time to invest in an alarm system...

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Tuesday, August 18, 2009
Try to make sense of this.
The owner of ABC Car Sales & Rental, 617 N. Dixie Hwy., told police someone burglarized his Hallandale Beach store between 6:30 and 11 p.m. July 28.
Hmm. Not sure when during those five hours the burglary happened. Guess you need an alarm system, dude. But, well, this probably doesn't happen that often. You learned your lesson. Oh well.
The burglars stole three Dell laptops valued at $800 each, a surveillance system, two cameras, a digital video recorder and an alarm siren valued at a total of $4,000 and three Global Positioning System units valued at $200 each.
A: Those Dell laptops are valued by me at about $80, not $800. You can get brand news ones for like $499. I saw the ad on TV about 50 times during 60 Minutes the other night. B: What's going on with the surveillance system, exactly? Did you not have the DVR secured in an out of the way place? Did you go online and buy this and install it yourself and think it was actually going to do something? Seems like that was a bad investment, but, hey, live and learn, right?
As the owner walked through the store with officers they spotted a phone junction box ripped from a wall and lying on the ground. A video camera was removed from a wall and a phone wire torn off another wall.
The sentences were inserted in the story just because. It's called adding "color." I don't really see what other purpose they serve.
The burglars bent and twisted a metal door to enter the business. A door jamb surrounding the steel door was broken, split and splintered and the key pad for the alarm system was taken off a wall.
Yikers. Seems like these guys made a bit of a ruckus getting in. Must be an out of the way spot. Weird, right? Especially considering this was done before 11:30 at night, when people are kind of our and about. But here's the real question: HOW IS IT POSSIBLE THAT THE KEY PAD FOR THE ALARM SYSTEM WAS TAKEN OFF THE WALL AND NO ALARM WENT OFF AND NO CENTRAL STATION WAS NOTIFIED AND NO COPS WERE DISPATCHED? I mean, they don't even know what time this happened. If there's a dispatch, and the guys are just too quick, well, that's that. But if there's an alarm system and this happens, someone screwed up in a major way, right? What is going on here?
A black crow bar was left behind inside the business.
Let's check it for prints.
The owner told police it was the fourth time this year the business had been hit.
What? There's no way this is real, right? It's got to be an insurance thing, or something. How could this be the fourth time this has happened and the alarm system doesn't work and he's got no idea where or how to install the cameras, etc.? It's ridiculous. I really do not understand the world.

A better plan for churches

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Tuesday, August 18, 2009
Remember that article I linked to about arming the congregation? Looks like some guys are coming together to see if they can figure out a better plan. I don't have a link, but here's the gist:
The American Society for Industrial Security International (ASIS) is bringing together security and cultural professionals from various religious communities for the Faith-Based Organization Security Council (FBO Council), an interfaith sub-council started earlier this year as part of the organization’s Cultural Properties Council. The FBO Council will address the security risks and needs of houses of worship and faith-based organizations to develop best practices and standards.
Good idea, if you ask me.
“The Faith-Based Organization Council is a result of incidents of violence and other crimes against houses of worship and faith-based organizations,” said Jeffrey Hawkins, executive director of the Christian Security Network, and head of the FBO Council. “We want to have all faiths represented so we can effectively develop comprehensive standards and guidelines, and tackle issues that all religions are facing now and in the future.” Hawkins is also vice chairperson of ASIS International’s Cultural Properties Council. He will head the Faith-Based Organization Council through 2009 and become chairperson of the larger Cultural Properties Council next year. ... The Faith-Based Organization Council is ASIS International’s first body dedicated to security issues among faith-based organizations. The group already has recruited members from the Christian, Jewish, Mormon, and Muslim faiths. “Having representatives from diverse faiths will help garner further communication and help build trust,” said Nawar Shora, legal director of the American Arab Anti-Discrimination Committee and a FBO Council member. “Perhaps one of our greatest challenges as a society has been a lack of trust and lack of understanding. The Faith-Based Organization Security Council will help further communication and broaden understanding, thus ultimately improving society's trust. Once faith-based communities secure this trust, they can move forward in security, safety and dialogue.” The organization will identify the major risks that houses of worship and faith-based organizations face, including violent crimes, arson and internal theft, and develop standards and guidelines to combat them. One of the first projects of the council is a resource guide for houses of worship and other faith-based organizations. The guide will provide insight and instruction for developing safety teams, assessing risks, identifying potential dangers and protecting high-profile religious leaders. Hawkins will outline several strategies in “Increasing Risks for Faith-Based Organizations,” a presentation at ASIS International’s Annual Conference in Anaheim, Calif., Sept. 21-24.
Practically speaking, it wouldn't be a bad idea for integrators to bone up on the guide they release and hit this panel discussion. Places of worship represent a real marketplace - already, the A/V guys make many a good sale on giving them their sound systems. No reason not to add on video, intrusion, and access control. I still don't think they'll go for the metal detector at the front door, though.

Is this the worst model ever for municipal monitoring?

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Monday, August 17, 2009
We've been writing quite a bit about public-private partnerships for municipal surveillance, with the general model being that the city and/or some private businesses buy some cameras, have them installed, and then contract with a private monitoring center to monitor them. It seems to work especially well with some analytics involved. But here in Lancaster, it's an unaccountable non-profit organization that's installing and watching the cameras. Why? As the critics in the story I linked to suggest, it's not controlled by the cops, so there's no jurisdictional reason for these people to be watching, and it's not a professional security company, so there's no industry-standard controls as might be employed at a five diamond monitoring center. This weird Lancaster Community Safety Coalition runs everything, but they don't seem to have any idea what they're doing. They're defending themselves as though they're being hit with Big Brother attacks, but that's not really the issue. The issue seems to be that their model is doomed for failure and makes no sense. But they don't even get the argument being levied against them. People say this: "Crystle, a software entrepreneur who has spoken out against the cameras for more than four years, says they should be turned off until the coalition establishes clear framework for accountability and oversight." LCSC replies with this: ""There have been lots of opportunities to weigh in on this," says Lancaster Alliance president Jack Howell, also a coalition board member." But then can't give an example of who they'd actually be accountable to the community. It's not that people don't feel like they can't weigh in, it's they feel like there's nothing good to weigh in on. I'm really quite perplexed by how they came to the idea that they wanted neighbors and volunteers watching the cameras instead of police and professionals. This commenter at the bottom seems like the smartest guy in Lancaster to me: "I really just wish that this was something the police controlled entirely. Oddly, I feel even stranger knowing that most of the people that work there live in the city. I feel a lot could be done to hide footage or just not tape crimes being committed when they might be friends of yours." Right? Do you really want your neighbors watching the cameras? Or do you want third-party, objective people watching the cameras? It just seems like a strange, strange setup. One not to be emulated.

Do resi security? How about those housing numbers?

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Monday, August 17, 2009
The good news is that a leading index of builders' confidence went up. The bad news? They think the market still stinks. Guess that's good in the sense that they haven't lost their marbles. I mean, if those builders thought the market was really great all of the sudden, you might wonder what kind of punch those builders were quaffing, no? Here's the WSJ story. The Commerce department will be releasing more data this week. Tomorrow we'll have housing starts and building permit data. The home builders' index will likely rise to 19 in August from 17 in July. The MarketWatch consensus calls for starts to rise about 2% to a seasonally adjusted annual rate of 596,000 from 582,000 in June. See what happens tomorrow.

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