Subscriber Discussion

Industry Rumor Amazon Buying ADI?

UM
Undisclosed Manufacturer #1
Aug 22, 2018

Heard from two separate people today there is a rumor that Amazon is might be looking at buying ADI?  Anyone else hear this?  Gossip or where the is smoke there is fire?

JH
John Honovich
Aug 22, 2018
IPVM

With the ADI spinout as part of Resideo/Honeywell Home, there has been a lot of talk about selling off ADI. I don't know how true that is. I do think the combination of ADI and Honeywell Home is a bit strange given ADI's more commercial focus, so I could see them considering selling that off for a substantial enough offer.

Would Amazon buy ADI? I don't know. However, related to Amazon industry interest: Amazon Going To ISC West

SD
Shannon Davis
Aug 22, 2018
IPVMU Certified

Yes ADI does focus on commercial I would venture to say their main focus is on residential. They sell thousands upon thousands of alarm panels for residential systems. The bulk of their customers are residential/small commercial. I have used ADI for years and back when I did residential that is all we used.

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Clint Hays
Aug 23, 2018

I was in ADI's branch no less than once a day picking up panels or parts for years. Ademco is/was a workhorse during the intrusion heyday (horse and hay* pun intended).

SD
Shannon Davis
Aug 23, 2018
IPVMU Certified

Yes indeed. Our order was probably 30 to 50 each week at a minimum. Those were the days of selling the monitoring contracts for sure.

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UM
Undisclosed Manufacturer #2
Aug 22, 2018

Any idea on ADI annual revenue and possible valuation?

JH
John Honovich
Aug 22, 2018
IPVM

Homes + ADI is reported in Honeywell's financials, in preparation for the spinout, with H1 sales of $2.37 billion or an annual pace of $4 - $5 billion.

ADI alone, I would guess is $2+ billion. Once they spinout, I would suspect they would report ADI numbers separately.

As for valuation, Tri-Ed was acquired by Anixter in 2014 at 0.73x revenue (price - $420m / revenue - $570m). Ingram Micro was acquired in 2017 for $6 billion vs ~$43 billion in revenue.

What ADI's valuation would be not sure since I don't know their profits. However, Honeywell's financials point to decent ADI revenue growth (for a distributor):

Sales in Homes increased 9% (increased 7% organic) in the quarter and increased 10% (increased 7% organic) in the six months primarily due to growth across Products and Distribution (ADI) and the favorable impact of foreign currency translation.

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JH
John Honovich
Aug 26, 2018
IPVM

Update: I found a recent Honeywell IR report that discloses ADI's revenue as $2.5 billion, of which just over $300 million is from Honeywell Homes division:

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Sean Nelson
Aug 22, 2018
Nelly's Security

This would be a wierd buy for Amazon IMO. Unless they decide to completely transform their business model into heavy e-commerce and allow commercial sales to the public, i dont see this fitting well into the way Amazon likes to sell.

ADI is strictly wholesale only with little e-commerce presence, which is opposite of what Amazon is all about.

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Brian Rhodes
Aug 22, 2018
IPVMU Certified

Given that Amazon sells to anyone and ADI sells only to 'authorized' customers, I'm not sure all of ADI's current partners would go along with that deal, at least not without fundamental changes.

The existing tech support/RMA/Warranty costs behind many products would need to  increase.

SD
Shannon Davis
Aug 22, 2018
IPVMU Certified

Considering how ADI has focused on their own brand with WBOX and that has upset some of their manufacturing partners not sure if that would really matter. Let's just say perhaps Amazon buys ADI that doesn't necessarily mean they would immediately move ADI from being a wholesaler. Many of the products ADI sells you can buy on Amazon anyways. As IPVM has shown before with orders from B & H Photo the Axis camera orders came from ADI if memory serves me correct.

As far as RMA/Warranty if you buy an Axis camera from a non authorized vendor technically they don't have to offer warranty support on said equipment. Now if you are a business buying 100's of Axis cameras my guess is they will still support those buying the cameras from a non-authorized vendor. I have told this to a couple of customers that have bought from B&H photo and they can truly only see the few dollar savings and not the long term of the cameras.

JH
John Honovich
Aug 22, 2018
IPVM

Shannon, I will say in the past year ADI has toned down the W-Box marketing. It's still happening but it's not as prominent and blatant as it has been, related Jan 2017 ADI "HD Cameras As Low As $29.99"

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James Ashley
Aug 27, 2018

Keep in mind some of ADI's 'authorized customers ' are, in fact, end users. If you have money, a pulse,  and don't require hand-holding, (read: extensive tech support) they will sell to you...

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Meghan Uhl
Aug 27, 2018

Given the increase in popularity of DIY, I would think Amazon taking a previously "only available wholesale" and opening it up directly to the consumer would increase their sales proportionately.  The ones who will be hurt are the dealers who up to that point have been protected by ADI's wholesale only model. 

Those dealers will now have to sell a service only model to install, program, monitor, service, maintain and leave out the equipment.  That might not be a bad thing for them because it would eliminate their responsibility for RMA's, warranty support etc.  They can charge for every minute spent and not have to stock replacement parts etc.  

The thing I find odd is that many of the items you can buy from ADI you can already buy on Amazon so if they want to garner ADI's customers they can just do that by adjusting their Amazon pricing to meet ADI's wholesale right? 

Seems like that would be cheaper and just as effective as buying the whole company unless Amazon wants/needs more local warehousing?

 

U
Undisclosed #3
Aug 22, 2018

I would love to see everything ADI sells be made available to the DIYers of the world. Thanks Amazon please continue on with world domination. Time to clean house on all these legacy distributors and make them feel the their end is near.

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UI
Undisclosed Integrator #4
Aug 23, 2018

Scansource Scansource Scansource.  

Yes Amazon, please by adi tri-ed and especially anixter and get them the hell out of here.  These "Security" box movers do not protect the security channel and go after our same customers directly.  They all have inside sales that go direct to end users and that is 100% fact.  

Why put your money in your competitor's pockets to help compete against you?

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Daniel S-T
Aug 23, 2018

But isn't that exactly what would continue to happen if amazon bought them all up? They wouldn't just go away, all that product would now be on amazon for anyone to look up and buy.

I think your problem would get even worse.

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UI
Undisclosed Integrator #4
Aug 23, 2018

"Currently" many manufacturers list Amazon bought products as not supported (warranty void/no tech support).  I use this quite often to educate customers on this fact and mostly steers it back my way.

Perhaps Amazon may want to take over the security channel the way it is supposed be done by protecting it (probably not), who could possibly stock more and ship faster? It could be a win/win for manufacturers/integrators and end users.

At least Amazon doesn't pretend to be your "Partner" while the next second they are your competitor going for the same business.  Don't claim to me, "But we are just selling them wire...." 

There is nothing like proposing a job to a customer, getting quotes from Anixter, and a month later you show up to a customer onsite and those exact parts are drop shipped by Anixter to the customer because they sold direct.

We all get backstabbed in life, its about limiting/reducing the amount of backstabs.

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SB
Steven Burman
Aug 27, 2018

Amazon buying ADI sure would impact that whole selling direct controversy, wouldn't it...

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U
Undisclosed #5
Aug 27, 2018

Buying ADI would be like Bezos opening a brick and mortar book store. On a serious note:

I talk to Amazon (B2B team) upper management on a regular basis. The talking points they have:

Amazon is going all out on their B2B Prime. They have so much in terms of logistics and already are getting major vendors to move their logistics to Amazon while allowing them to maintain their same pricing structure. All this while Amazon is offering free content support to build A+ SEO ranked product pages. 

I asked Amazon directly if they were going to buy their way in to specialty markets like they did with Whole Foods. They made it very clear that B2B is their plan to redefine the "obsolete" channel sales industries (specifically referring to brick and mortar distribution). They have zero interest in buying in to a market.  They are a hammer and everything to them looks like a nail. 

Their rep said they don't mind working WITH distribution, but utimatley don't see any long term value in keeping them as part of the B2B sales channel. He ended the statement by saying "we have enough warehouse space to fill the whole state of Texas..." Then follow by basically saying aquisitions of niche B2B markets is nowhere in the company business plan. 

I'm not an insider, just passing on info I recieved with one of the upperlevel guys in B2B Prime. 

Be the windsheild, not the bug. Get in to value add services and/or skilled trades and sell those on Amazon. That's next years big push. :/

 

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JH
John Honovich
Aug 28, 2018
IPVM

Good info, #5, that seems reasonable to me.

Related, and in a similar vein, Amazon Going To ISC West

SB
Steven Burman
Aug 27, 2018

If you think about it, this really isn't anything new. When I first came into the industry, we priced alarms by the square foot. I can remember the owner of the company telling me how he added money depending on what kind of car they drove. Anybody remember AT&T wireless? 3 window sensors and a motion detector for 6 grand? 

Then along came the "$99" alarm system. You know how we fought the 99 dollar guys? By providing a level of service way beyond anything you'd ever get from a company selling accounts to P1. We charged our price, and still had a 6-week backlog.

Same thing here. Keep doing what you do, and strive to improve the way you do it. You'll do fine. 

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