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Jeff Kessler

HID acquires Quantum Secure

Kessler: Acquisition is 'last step' to fill out identity portfolio
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04/06/2015

AUSTIN, Texas—Secure identity provider HID Global has acquired Quantum Secure, a provider of identity management software. Denis Hebert, HID Global CEO, told Security Systems News that the deal brings an important new capability to HID.

Who’s afraid of Google?

Smart resi providers should take Google’s move into home security seriously, but could wind up benefitting from it
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04/01/2015

YARMOUTH, Maine—Google’s venture into home security and automation may turn out to be a very good thing for traditional resi companies, according to providers interviewed by Security Systems News.

Monitronics acquires LiveWatch Security for $67m

DIY provider LiveWatch diversifies Montronics' offerings
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03/03/2015

DALLAS—Monitronics has acquired LiveWatch Security, a provider of professionally monitored DIY home security systems, for $67 million.

Canon to buy Axis for $2.8 billion

Kessler: Price is ’50 percent premium over yesterday’s closing price’
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02/10/2015

TOKYO—One year after buying the leading VMS provider, camera manufacturer Canon has made an offer to buy Axis Communications, the leading network camera provider, for $2.8 billion cash.

Avigilon buys BRS patents, others for $13m

One month after spending $80 on ObjectVideo’s patents, Avigilon ‘tries to lock in IP in a whole range of analytical algorithms’
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01/21/2015

VANCOUVER, British Columbia—Avigilon today announced it spent $13.3 million acquiring video analytics patents that extend into behavioral recognition, video segmentation and meta-data and more. This deal comes one month after the video surveillance provider spent $80 million to acquire patents from ObjectVideo.

Google’s Nest buying Dropcam

The $555 million deal brings Google into the home security market with a DIY product, but what about the privacy of customers’ connected home data?
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06/23/2014

PALO ALTO, Calif.—First, Google got into home automation early this year with the $3.2 billion buy of smart thermostat and smoke alarm maker Nest Labs. Now, Nest is buying startup Dropcam, which makes video cameras that stream video to a user’s computer or cellphone. The deal gives Google an entrée into home security.

Google’s Dropcam security push and Apple’s smart home “big play”—should security companies be worried?

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Wednesday, May 28, 2014

Recent news reports say that Google may buy startup Dropcam, which makes video cameras that stream video to a user’s computer or cellphone, as a way to get into home security. And The Financial Times has reported that Apple is soon expected to make a “big play” into the smart home, launching a new software platform that will allow users to control security systems and home features such as lights directly from their iPhones.

Should security companies be worried? Not really, according to a report today from Imperial Capital, a New York-based full-service investment bank.

If the Dropcam report turns out to be true, it would mean Google is adding a security component on the heels of its entrance into home automation with its recent $3.2 billion purchase of Nest Labs, maker of smart thermostats and smoke alarms.

But the report, authored by Jeff Kessler, Imperial Capital’s managing director of institutional research, said it doesn’t believe the Dropcam purchase would have a negative impact on security companies or other pure play home automation companies, like Control4.

The reason, it says, is that “security companies generally are not participants in the do-it-yourself (DIY) market and do not target particular groups that may be interested in such products (e.g., college students, young professionals living in high rises).” Also, the report said, although “Dropcam could be a good entry product for those that do not understand or are not familiar with security products, it does not replace the security, home automation, and customer service capabilities which the likes of ADT or Control4 provide, and nor do we believe that it wants to.”

What about the potential Apple smart home/security play?

The report says: “We wonder if Apple will open up its “big play” to allow a broad base of installers, service, and responders to interact with it, or will it be another closed end system, in which the homeowner, or more likely the apartment owner, can check on what is going on at home on an Apple iPhone, and then have the responsibility of “making the call” to police or health responders based on what they have just seen on the iPhone. Another uncertainty is if the police would trust this system, or would law enforcement be more likely to respond to a more familiar source that has verified the same incident.”

The report summarized by saying that while the new developments are exciting and will be particularly attractive to those who don’t own homes, the lack of professional monitoring is a drawback.

“Remember, these monitoring stations (to be accredited) have to show that their average time to make a decision to dispatch or not to dispatch is less that 30-35 seconds, have tremendous redundancy, and can typically be trusted. We simply do not believe that Apple users will get that service.”

In fact, the report says that these DIY products could indirectly help professional security companies by introducing a younger generation to the idea of home security/home automation, which could lead those customers to “potentially switch to a larger, more powerful, and more comprehensive platform in the out years.”

Alarm.com, a leading provider of interactive security services, also weighed in to me on the new developments involving Google and Apple.

That Vienna, Va.-based company stressed that security is the backbone of the smart home and noted that professional monitoring is a key differentiator, but said security companies need to make sure homeowners know that.

"The key purchase driver for home automation is security.  We see this in both consumer surveys and purchasing trends," Alarm.com said, in a statement.

Also, Alarm.com said, the announcements "validate the popularity of a growing range of connected devices and services. Security dealers should tap into this underlying consumer demand by aggressively marketing and selling a complete range of connected home technologies with professionally monitored security at its core."

 

Kessler examines future of Monitronics

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Wednesday, May 14, 2014

Good news for Ascent Capital, the parent holding company of Monitronics, according to a recent research report conducted by Imperial Capital’s Jeff Kessler. The takeaway is that the monitoring company’s Q1 2014 earnings—$484 million in revenue, EBITDA of $321 million—were consistent with estimates and the company is “not experiencing impact from the entrance of cable/telcos."

As a result, Imperial Capital is maintaining the outperform rating and one-year price target of $94, about 43 percent above the company’s recent share prices, recorded in the report at $65.80.

The share price is being impacted currently by skittishness surrounding the big new market entrants, referred to as a “false negative perception about the competition from cable/telcos.”

“We believe that Ascent remains fundamentally strong and is not seeing any slowdown as a result of cable/telcos entering the security space,"  the report says.

As far as the new competitive landscape, Kessler believes traditional security companies remain Monitronics’ primary competitors. He also envisions something of a schism taking place between traditional large security companies and the newcomers who established themselves first in other industries.

The former, according to the report, will continue to command their share of business in the market for critical life safety systems, while the latter will bring to market more of a “home services,” lifestyle-focused package. The report said that existing skepticism about the “commitment to service” of the cable/telcos could hinder their ability to gain share from the largest security providers.

Kessler’s report was extremely thorough, full of many fascinating prognostications about not just Monitronics but the industry at large. Needless to say, a lone blog post can hardly do it justice. Here’s a sample sentence from the report that certainly piqued my interest:

“We believe smaller, undercapitalized security companies who do not have the capital to install Alarm.com or iControl wireless interactive systems may face real competitive threats.”

The report also touched on the implications of the enormous advertising budgets of the new market entrants, as well as the positive effects of Monitronics’ acquisition last August of Security Networks.

ADT goes after small business

Orbegoso: Opportunity is significant; only 50 percent of small businesses have monitored security
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04/14/2014

BOCA RATON, Fla.—ADT is going after small business with targeted offerings for specific vertical markets, the first of which it launched on April 10.

ADT’s move into commercial security, fire

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Wednesday, March 26, 2014

Will ADT move into the larger commercial security market when its non-compete expires with Tyco?

I contacted ADT to see if I could talk to someone about it. Cheryl Stopnick, director of dealer communications, responded, and told me that ADT's not going to discuss business plans at this time.

They may not be discussing plans, but it certainly seems like they’re making them.

Right now ADT does commercial security for small businesses, which ADT defines as those businesses that are 7,500 square feet or less. ADT and Tyco came up with that definition when ADT spun off from Tyco. At that time it entered into a non-compete agreement with Tyco Integrated Security. That agreement expires Sept. 30, 2014.

As Luis J. Orbegoso, president of ADT’s Small Business Unit, said during a Dec. 6 investor call (according to seekingalpha.com), the “ADT brand has supported not only small businesses but also medium and enterprise businesses for almost 140 years. And our current definition of a small business as a location that is 7,500 square feet or less is somewhat arbitrary and not necessarily a true reflection of the market. It was actually the result of our non-compete zone improvement with Tyco, which expires in 10 months.”

Orbegoso knows commercial security. He joined ADT in 2013. Before that he was with UTC for five years, where he led the commercial security business (though I think he held a few titles while he was there, which seems to be the norm for the security folks at UTC). He came to UTC as part of the GE Security buy.

During the Dec. 6 conference call, (again, according to seekingalpha.com) Orbegoso said “once this noncompete expires, we will have the ability to take a look at possible adjacencies, such as commercial fire solutions and larger commercial and enterprise security offerings that we can integrate and leverage with our existing infrastructure and customers. These adjacencies could potentially quadruple our addressable markets. And again, today we are extremely encouraged by the momentum that we have in this space and our ability to execute.”

The potential is definitely there with the larger commercial projects, according to the folks at Imperial Capital. Jeff Kessler estimates that the security market in businesses smaller than 7,500 square feet is $2 to $3 billion, but the the market segment that includes businesses that are 7,500- to 25,000 square feet is an $18 billion to $20 billion market segment.

I spoke to some folks in the industry (aside from TycoIS) who currently do work in that market segment and they fully expect ADT to jump in to that market.

And while it’s an opportunity, not everyone believes it's an $18 billion-plus opportunity. It may be on paper, but one integrator told me “that’s a segment that’s been stuck in neutral for a lot of years.”

The commercial fire business, on the other hand, if you can get the right people on board—and ADT certainly has the resources for that—could be a more immediate opportunity.

Orbegoso has instituted many changes in the way ADT approaches security for small businesses. It was typically treated as a kind of  “extension of residential security,” but that’s the not the case any more. It will be very interesting to see how Orbegoso and ADT approach this new, larger, more complex market segment.

There may be disagreement about market segment size, but there’s general agreement that ADT has the potential to have some meaningful impact in this segment.

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