ADT Is NOT Going Out Of Business, Says ADT

ADT is spreading a very important announcement, one that IPVM must share.

And if you didn't already realize this, it proves ADT has more money than brains.

Is This Necessary?

Why has ADT issued such an alert?

Only 1 online claim could be found insinuating this. A Google searched for "ADT Going Out of Business" returned nothing and a Twitter search for the same returned one result from 2012. This Facebook page had a peculiar ADT ad:

Wait? What? Don't believe ADT is going out of business unless ADT tells it to you directly?

ADT is a large multi-billion company who is very profitable. Who would even believe such a claim?

Best Defense - Do Nothing

I am sure someone somewhere said something about ADT going out of business. After all, there's a lot of people in the world.

But going on the defensive and posting denials is actually worse because:

  • Assuredly almost no one has ever heard of such claims nor believes them
  • Denying them actually makes people wonder if it's true

Obviously, ADT feels like a punching bag, but they seem absolutely incapable of handling it productively.


There are companies in my area that went around telling people that the company I used to work for had gone out of business and that they were taking over the contracts. You would be surprised how many people believe the door to door sales people when they are nice.

We had many customers fall for it, some question it, and some ignore it.

Denying them actually makes people wonder if it's true...

Because the most insistent deniers are the most insidious liars. It would help everyone's credibility if once in a while a company would fess up, mid press conference, like 'Ok, you nailed us. We're totally going belly up. Right after I fire the only employee left, myself"

ADT is a large multi-billion company who is very profitable. Who would even believe such a claim?

A lot of non-security people for sure. They don't know if ADT is profitable or not; and size/recognition is no guarantee (Delta/GM) either. Try telling the next adult layman you meet that 'ADT just filed for chapter [prime number between 6 and 16] protection.' You win if they say anything like 'Good one!".

Guys, my point is simple. There's not any news / press / discussion about ADT going out of business to justify this.

It's one thing if it's on the front page of the NY Times or there's a report on 60 Minutes raising these questions. But there's nothing even close to this.

So a few door to door clowns told a few people individually that ADT was going out of business? And in response ADT posts a public message on the Internet? This is a PR 101 failure.

Milestone: NOT purchased by Somali Pirates

Rather than deal with real issues or threats, ADT chooses to address a strawman problem. Meanwhile, everything is exactly the same as before.

At the end of the year, they can internally claim victory for stamping out a rumor that nobody ever heard.

But usually strawmen are in the person / company's favor, i.e., you are trying to make yourself look good.

For example, ADT's CEO says he is not the world's most handsome man. The strawman ties him to something positive.

You're trying to distract people away from negative things, not towards them.

Is that really a corporate ADT ad? Why would they knock the knockers? Aren't they the single biggest non-not for profit-knocker around?

Could it be that they are technically upscale Bell Ringers, since they won't waste time pitching anyone that can't see the value of a doorbell? Smart.

@Brian

At the end of the year, they can internally claim victory for stamping out a rumor that nobody ever heard.

True, but would we really criticize a firefighter for snuffing even just a burning twig using what means at his disposal? :)

Macroaxis calls pick'em on ADT bankruptcy in the next 2 years, Tyco is fine though.

Who knows what their formula is? But, who cares, it's fun anyway. Watch out, they only give you a handful of searches before you have to register...

The same site says Avigilon has a 76% probability of bankruptcy:

As such, I'd question the legitimacy / accuracy of this site, far more than I'd expect ADT and Avigilon to go bankrupt in the next 2 years.

Beyond that, I return to the more fundamental point. Are there a significant number of people who know about Macroaxis' claim? Are those people taking this seriously? If the answer is no to both of those questions, the right move is to simply ignore it, not use your marketing department to put a spotlight on it.

Put another way would be, 99.99% of people that hear the claim "ADT is going out of Business" hear it from ADT for the first time... That even if they ARE going out of business, is dumb!

Given that's its far more typical and easier to sweep things under the rug than acknowledge them, the question of why is eminently fair, and worthy of speculation. Marty and Luis are just saying if you really have to take public action, here is a better way...

As for macroaxis, their bankruptcy thing is bunk, but the balance sheet comparator thing is pretty cool. Positive cash flow of > 1 billion for ADT, and Tyco the opposite. Hmmm..

The same site says Avigilon has a 76% probability of bankruptcy

That's only because their formula is fined tuned and includes things like number of finance execs forced out divided by number of days before earnings due. ;)

Which ADT are we talking about. We have several companies that represent themselves as ADT in ours region. They appear to go "OUT OF BUSINESS" routinely.

If ADT really thinks that the issue of 'people saying they are going out of business' is a big deal, simply refuting that this claim is true - unless they tell you otherwise - is one of the weakest ways to combat this perceived issue, imo.

'ADT going out of business' may seem far-fetched to industry people, but for an entity of this size to respond to such a thing (rather than simply ignoring it), they must see the need to combat this claim...so they must think it happens a lot.

If I were the one tasked to come up with a response to this perceived threat, I would not simply deny the claim.... that's weak. I would begin an advertising campaign designed to make the claim look like one of the dumbest things ever uttered by any human on earth. Make it funny so people will remember it when the door-knocker makes this claim... that's strong.

Never battle from a position of weakness.

"Sometimes fear makes our competition say silly things out of desperation, like ADT is going out of business. ADT is going strong with yearly profits and an average of xxxx new subscribers every day. Desperation from our comptetition let's us know we must be doing something right!

ADT..... Here Today, Here Tomorrow!"

I think that would have been a better response.

John,

Interesting that this discussion item has come up. Last week I spent 10 hours reading their two annual reports and the last quarterly. These are the things I would be concerned about:

Attrition still continues to increase 13% .. 13.5 ..14%

Recent assumption of 1.5B debt to purchase shares back and fund acquistion of Protectron.

Large Investor with seat on Board wanted out, got preferrential treatment in buy back in Nov 2013. Shares drop significantly thereafter. Cap value of O/S shares drops from 9B to 6B. Class action lawsuit has resulted.

The depreciation of dealer accounts acquired is over 15 years with three different depreciation rates over the 15 years. However, with a 14% attrition how do you justify 15years, it should be closer to 7~8 years. Adjustment here would have huge impacts to their operating profit and valuation.

With a cap value of 6B and with Long Term debt of 7.5B their O/S shares x stock price per share means a 21 x multiple on RMR sales. They assumed a $500M debt to purchase Protectron this year with a valuation of 45x on RMR. It seems a desperate move to still show the RMR is growing (albeit 4%).

The latest quarterly report says Dealer sales are declining significantly due to competitive pressures.

In May, a $1B senior note (non secured at 6.5% interest), was replaced with a similar note of same value and interest but was now secured.

They are still trying to seperate the monitoring accounts into different stations from Tyco by Oct 1, I have heard they are behind schedule. On the same date the non-compete between Tyco and ADT expires.

Tyco kept the best monitored accounts (large commercial security and fire monitoring), left ADT with the high attrition accounts.

I give it 24~36 months.

Undisclosed B, thanks for the feedback and detailed analysis.

First of all, you prove my point about why ADT should shut up. :)

Because ADT showcased a claim that no legitimate person had previously publicly made, this is now causing serious people like you to post analysis criticizing their future fortunes. And then it snowballs as other industry people read it and start to wonder, "Huh, maybe ADT will go out of business."

As to their financial position, I am not suggesting ADT is a great investment or that ADT is the future (indeed, over the long term, I think Internet centric alarm providers will seriously undermine their competitive positioning). However, a company that consistently generates $1+ Billion in operating cash flow and long term contracts with customers has a strong economic foundation. Again, not saying ADT is a great business but, even worse case, they've got a lot of resources to avoid bankruptcy for years to come.

Well, ADT corporate only has a 'B' rating from the BBB (A+ to F). Reasons for the lower rating include:

  • Government action(s) against the business.

Not that BBB ratings mean very much. IMO, the BBB is basically in business to make money for the BBB; not to protect consumers.

Government action(s) against business.

...in business to make money... not to protect consumers.

Just like ADT. So maybe it takes one to know one? ;)

Yes but ADT is supposed to be a profit-oriented business. The BBB is supposed to be a customer-protection nonprofit. My experiences with them would lead me to give them a D-.

I had nothing in my mind that would think ADT is going out of business. Now that they posted that AD, the thought is crossing my mind and/or this is something going "bad" at ADT. Well done ADT, well done.