Goodbye, Zonoff: IoT Provider Sunk by Alarm.com, Icontrol, Honeywell, ADT
Zonoff, one of the most promising IoT platform providers, closes shop after Honeywell reportedly reneges on acquisition. Security and home-automation giants ADT, Icontrol and Alarm.com figured into the demise.
Zonoff, a rising star in ShaaS (smart home as a service) is gone. The IoT provider behind Somfy Tahoma, Staples Connect, LG Smart Security, and Dixons’ Connected World Services has closed its Malvern, Penn., offices. Virtually all of Zonoff’s 75 employees have been hired by Ring, the popular maker of video doorbells.
Reportedly, Honeywell was to acquire Zonoff but nixed the deal at the 11th hour. By then, Zonoff had rebuffed other would-be suitors and investors, and had no time to regroup.
“We were going down the path with a bunch of folks,” says former CEO Mike Harris, in an interview with CE Pro. “There was no lack of opportunity. A lot of what ended up happening wasn’t related to the market or long-term business opportunities.”
Although Harris didn’t mention Honeywell by name, other sources tell CE Pro the giant security firm was about to close on the Zonoff acquisition, then unexpectedly scrapped the deal.
Two big stories here: I took a circuitous route to get there, but you will see below that there is a chance ADT will end up owning Zonoff's intellectual property. There is also the possibility that some of the most important SHaaS IP -- especially concerning the integration of professional alarm monitoring with home automation -- will be owned by just a handful of companies: Alarm.com, Honeywell and ADT on the one hand ... and Comcast/Xfinity on the other. The other big story is that Ring acquired all of the Zonoff talent, creating a formidable IoT brain trust in one fell swoop.
Honeywell, Alarm.com, Icontrol and Zonoff: The Plot Thickens
Just as it was canceling the Zonoff acqusition, Honeywell dropped its antitrust lawsuit against Icontrol and Alarm.com, two giants in the SHaaS field that merged in early March. (Alarm.com acquired half of Icontrol; Comcast/Xfinity the other).
Honeywell, whose Total Connect platform competes with Alarm.com and Icontrol, had claimed the two incumbents would dominate the SHaaS market, given their extensive patent portfolio related to cloud-based security and home automation.
Afterall, Icontrol and Alarm.com had already sued competitors Zonoff and SecureNet for patent infringement (the cases are still pending). Honeywell, however, has not been sued by Icontrol or Alarm.com.
Backing up: Before Honeywell almost acquired Zonoff, ADT almost did. Sources say ADT was close to closing the deal, but it was never consummated. ADT, however, did invest heavily in Zonoff. More on that later.
Alarm.com and Icontrol own a large SHaaS patent portfolio, both individually and shared.
Sept. 2014 - Icontrol sues Zonoff (and SecureNet) for alleged patent infringement.
Dec. 3, 2014 – Zonoff announces a $31.8 million dollar funding round that includes ADT as a strategic investor. Reportedly, ADT receives the right of first refusal for a Zonoff acquisition.
May 15, 2015 – CE Pro reports Zonoff would be powering the forthcoming LG Smart Security.
Dec. 1, 2015 – Icontrol seeks injunction against Zonoff, following reported deal between Zonoff, LG and ADT.
At some point, ADT negotiates to acquire Zonoff, but the deal is kiboshed when Apollo acquires ADT in February, 2016.
June 16-17, 2016 – CE Pro publishes, “In Depth: If Comcast and Alarm.com Acquire Icontrol as Rumored.” Recognizing a huge gap in the marketplace if Icontrol disappeared, CE Pro ponders: “Who will be the next Icontrol?”
June 21, 2016 – Zonoff nabs a big customer, Dixons Carphone in the UK, which uses Zonoff for its Connected World Services (CWS) tech-support platform.
June 23, 2016 - Alarm.com officially announces partial acquisition of Icontrol, with the other part going to Comcast/Xfinity.
Jan. 5, 2017 – LG’s Smart Security finally launches.
At some point during this time, Honeywell negotiates to buy Zonoff.
Feb. 22, 2017 - Honeywell sues to block the merger of Icontrol and Alarm.com on antitrust grounds.
March 8, 2017 -- Honeywell “voluntarily dismisses” its antitrust case against Alarm.com and Icontrol.
March 9, 2017 - Alarm.com completes its acquisition of Icontrol.
March 2017, shortly thereafter – Honeywell abruptly cancels Zonoff deal.
Did Honeywell Bargain with Alarm.com and Icontrol?
Given the curious timing of the last three events – Honeywell dismisses antitrust case; Alarm.com closes Icontrol deal; Honeywell abandons Zonoff – we have to wonder: Did Honeywell do a last-minute deal with Alarm.com and Icontrol that precluded its acquisition of Zonoff?
My theory goes something like this: Honeywell agreed to drop its antitrust case and end discussions with Zonoff, in exchange for some kind of indemnification or licensing deal with Alarm.com and Icontrol. Otherwise, it would only be a matter of time before the combined company would go after Honeywell.
On the other hand, Honeywell has patents of its own in the SHaaS category, so possibly all three companies entered a patent-sharing arrangement, in which case, Honeywell might have little need for Zonoff … at least not for the $40 million reported by Stacey Higginbotham.
Speculating with a few industry insiders, a couple of them agreed with this theory of events; a couple of them didn’t.
Not surprisingly, the parties involved are not interested in discussing the matter.
Could ADT Own Zonoff?
The case gets curiouser and curiouser. A source tells CE Pro that ADT’s investment in Zonoff was debt-financed, although I cannot confirm that claim. If, as likely, Zonoff files for bankruptcy, ADT might come to own its assets.
If ADT picks up Zonoff, then it could use the platform to power other DIY solutions like LG’s Smart Security product. Instead of just offering ADT Canopy to third-party device manufacturers, ADT could offer a full suite of SHaaS solutions, including monitored security and home automation.
The hitch is that ADT agreed to a five-year contract with the combined Alarm.com/Icontrol.
If it does proceed with the Zonoff service, then we can assume ADT negotiated the terms with Alarm.com and Icontrol, whose patent-infringement suit against Zonoff is still pending.
On the other hand, those negotiations might have stipulated that ADT hand over Zonoff IP to the new Alarm.com.
Harris would not comment on the future of Zonoff and its customers because “I am no longer an employee,” he says.
CE Pro asked Dixons Carphone about the Zonoff service. Steve Moore, Director of Connected Home, was coy about the future. He told us via email:
We selected the Zonoff platform for a variety of reasons and we’ve been working with them for over a year. We’re building out a large-scale solution, incorporating our connected services technology, for a blue-chip client and the Zonoff team has been fantastic.
Speaking with Moore last year, he told me Dixons had performed due diligence on multiple IoT platforms and that Zonoff was the best of them all. He has seemed happy with the service so far.
So, will Dixons and LG end up teaming with the new Alarm.com? Or will it ultimately partner with ADT? Or none of the above?
Only Loser is Zonoff
It seems everyone’s a winner in this chaos – everyone except for Zonoff, which made huge investments to become “the next Icontrol” and arguably had one of the most promising IoT platforms around.
Sadly, Zonoff shareholders are the casualties in this battle among Honeywell, Alarm.com, Icontrol and ADT.
These shareholders included Zonoff founders, as well as Bulogics, the company that spun off Zonoff in 2011. Bulogics, now focusing on energy management and multi-family dwellings, was the platform behind Somfy’s Tahoma control system until Zonoff took it over.
Zonoff went on to power Staples Connect in 2013, an ambitious effort by the office-supply store to tap the burgeoning home-automation market. The project was abandoned in 2016.
Unfortunately, Zonoff’s early “wins” came to naught, and then the company became saddled with the Icontrol lawsuit.
Was Honeywell right in its antitrust lawsuit? And did Honeywell only perpetuate Alarm.com’s hegemony by negotiating favorable IP terms with its former nemesis?
At the end of the day, I agree with Alarm.com and Icontrol, who rightly argued that the market was much bigger than Honeywell defined in its antitrust case. Still, it’s tough to see the demise of an able competitor.
Big Winner: Ring
While Zonoff shareholders lost their baby, all 75 Zonoff employees (including shareholders) were hired by Ring, which set up an office in the Philadelphia area to house them all.
Ring plans to use the talent to expedite integration with third-party solutions, and hasten the deployment of a broader Ring ecosystem.
Of course, the big question is: What can they develop that isn't already patent-protected?
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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 firstname.lastname@example.org
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