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Control & Automation

Yawn: ‘Pundits’ Blame ADT’s Poor IPO on the Demise of Full-Service Security and Home Automation

CNBC interviewers and pundits-at-large try to blame ADT's lackluster IPO on a doomed market for full-service security and home automation, but they're simply wrong.

Yawn: ‘Pundits’ Blame ADT’s Poor IPO on the Demise of Full-Service Security and Home Automation
CNBC challenges ADT CEO Tim Whall to explain the security and home-automation giant's lackluster IPO. At the end of the day, the stock's poor performance probably had more to do with the fact that money would be going to pay off leverage, and less to do with the market for professionally installed smart-home systems.

Julie Jacobson · January 19, 2018

Protection One, Inc. didn't fare so well on its first day of trading on the NYSE as ADT. Heck, it didn't do so well in the few days prior to the Jan. 19, 2018, IPO. The security and home-automation giant expected to price shares at $17 to $19, but ended up offering 105 million at $14 apiece. The shares actually opened at $12.65, hit a low of $12 and ultimately closed the day at $12.39, down 11.5% from the offering price. The stock price continues to slide in after-hours trading.

Did ADT jump the gun on an IPO? The previously public company was acquired by the private equity group Apollo Global Management just two years ago for $6.9 billion. In an interview with ADT CEO Tim Whall on IPO day, CNBC asked: Why the rush? Two years is an awfully short "gestation period," as the host says ...

Whall responded, in essence, that ADT just worked really fast, meeting "most of the five-year targets inside of two years."

He added that "great progress" from employees led to "much better customer satisfaction, resulting in greatly improved cash flow to the business." 

Death Knell for Full-Service Security & IoT Companies?

Does ADT's lackluster IPO spell doom for full-service security and home-automation providers? Industry "experts" (who didn't ask CE Pro for our opinion) seem to think so.

The CNBC host suggested the proliferation of Internet-enabled products "would seem to lower the barriers to entry to those who would compete against the market leader ADT."

Mentioning the contentment with his own smart thermostat, he wondered aloud why he wouldn't just use Nest as his "security" system.

It's the same old question the "pundits" have been asking for at least 25 years since we launched CE Pro. Whall acquitted himself nicely: 

That last five feet of the home is important. It's a place where we shine 24/7, you know, having the technicians that are out there. The homes get more complicated all the time -- getting something to work. I happen to have adult daughters who can get things fixed in my house but when they're off, it's a little harder for me so who's gonna come in there and keep things working for ya? Who's gonna help you understand ... the Internet of Things devices in the home, making sure it stays working for you?

Again, at the ADT side, service is what we do. We take care of our customers 24/7/365 days of the year.

At this point, another CNBC host chimed in with a feeble and familiar challenge: Well what about Amazon? They have a lot of patents in the home security area.

Is there a genuine threat to the status quo in security and home automation? Most definitely. Is this reality the reason for ADT's weak IPO? Nope.

RELATEDADT Reveals 2017 Plans, Protection 1 Integration, Connected Home Opportunities

It's doubtful that either CNBC host really blames ADT's poor IPO performance on the demise of the full-service security/automation business. After all, Apollo still owns some  85% of ADT even after the IPO.

The CNBC interviewer actually answers his own question about the IPO when he says investors wouldn't be too excited that proceeds were mostly going to pay down leverage: "Those things don't always go over too well with investors ...."

There you have it. 

Is there a genuine threat to the status quo in security and home automation? Most definitely. Is this reality the reason for ADT's weak IPO? Nope.

And besides, ADT is embracing the hybrid DIY/Help-Me market with multiple new offerings including a new solution with Samsung SmartThings. The company isn't stupid.


CE Pro Exclusive: Top 2017 M&A in Security, IoT, Consumer Electronics, A/V




  About the Author

Julie Jacobson, recipient of the 2014 CEA TechHome Leadership Award, is co-founder of EH Publishing, producer of CE Pro, Electronic House, Commercial Integrator, Security Sales and other leading technology publications. She currently spends most of her time writing for CE Pro in the areas of home automation, security, networked A/V and the business of home systems integration. Julie majored in Economics at the University of Michigan, spent a year abroad at Cambridge University, earned an MBA from the University of Texas at Austin, and has never taken a journalism class in her life. She's a washed-up Ultimate Frisbee player currently residing in Carlsbad, Calif. Email Julie at [email protected]

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  Article Topics


Control & Automation · Automation · Whole House Control · Security · Surveillance Systems · Monitoring · News · Blogs · ADT · Home Automation · IPO · Security · All Topics
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Comments

Posted by Chris Erca on January 23, 2018

An excerpt from your article:
“Ring Alarm is a scary prospect for the status quo in security and home automation. The service will cost just $10 per month for remote access, professional security monitoring, cellular back-up, and 30 days of video storage for an unlimited number of cameras … with no long-term contracts required”

This is part of the reason and a big part!

Posted by Blefadts on January 23, 2018

History tells us that pundits are wrong most of the time.

Posted by LeeSSG on January 23, 2018

A closer look at the basic alarm industry, ADT, business model, from an industry insider with much M&A due diligence.

The basic business model will collapse (excessive customer revenue cancellation) without police emergency response to calls for help from licensed monitoring firms, like ADT. We often forget that most local police have no responsibility to respond to calls from private contract monitoring firms, unless they witness a 911 type event. After decades of experience with near total error/false alarms, most municipalities have re-classified ADT type remote monitored private property alarm systems as “deterrent systems”, and lowered the response priority to the level of nuisance calls, or no response. Some statewide legislation (Fl,Tx,Ga) even target the alarm industry (ADT) and ban calls to the police until customer notification first. While law enforcement has rejected support of “deterrent” systems, it has embraced “remote witness verification” systems. Key word is “witness”. Many of ADT customers, like some PULSE, have this updated technology, but most customers do not… Most customers are unaware of the void in their security expectations. Clever language in the consumer contract may not dilute or delay the consequences.

Source: Lee Jones; Support Services Group; [email protected]

Posted by LeeSSG on January 23, 2018

A closer look at the basic alarm industry, ADT, business model, from an industry insider with much M&A due diligence.

The basic business model will collapse (excessive customer revenue cancellation) without police emergency response to calls for help from licensed monitoring firms, like ADT. We often forget that most local police have no responsibility to respond to calls from private contract monitoring firms, unless they witness a 911 type event. After decades of experience with near total error/false alarms, most municipalities have re-classified ADT type remote monitored private property alarm systems as “deterrent systems”, and lowered the response priority to the level of nuisance calls, or no response. Some statewide legislation (Fl,Tx,Ga) even target the alarm industry (ADT) and ban calls to the police until customer notification first. While law enforcement has rejected support of “deterrent” systems, it has embraced “remote witness verification” systems. Key word is “witness”. Many of ADT customers, like some PULSE, have this updated technology, but most customers do not… Most customers are unaware of the void in their security expectations. Clever language in the consumer contract may not dilute or delay the consequences.

Source: Lee Jones; Support Services Group; [email protected]

Posted by Blefadts on January 23, 2018

History tells us that pundits are wrong most of the time.

Posted by Chris Erca on January 23, 2018

An excerpt from your article:
“Ring Alarm is a scary prospect for the status quo in security and home automation. The service will cost just $10 per month for remote access, professional security monitoring, cellular back-up, and 30 days of video storage for an unlimited number of cameras … with no long-term contracts required”

This is part of the reason and a big part!