Anixter Security Rebound and New Chief

By John Honovich, Published Oct 31, 2014, 12:00am EDT

3 months ago, Anixter's security struggled significantly with revenue actually declining.

Then, this summer, Anixter shook up the industry, acquiring Tri-ed for $420 million.

Now, they are bouncing back, at least somewhat. In this note, we examine Anixter's Q3 2014 financial results, the integration of Tri-Ed and who is now in charge.

Financials

For Q3 2014, overall organic security sales increased 8% year over year. That's a significant jump from the 2% decline year over year in the previous quarter.

America security revenue, which had an extremely poor previous quarter, grew by 6% compared to Q3 2013.

8% growth is not fantastic, and still significantly off their pace from pervious years, but puts them close in line to the overall industry average range.

Anixter projected $140 to $150 million for Q4 2014 Tri-Ed sales, which is roughly flat to very slightly up compared to their 12 month rate H2 2013 / H1 2014.

Tri-Ed The Big Push

On the earnings call [link no longer available], Anixter management focused heavily on the Tri-Ed deal and its importance.

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The first thing Anixter CEO emphasized was obtaining a "broader set of products and solutions, particularly in the areas of intrusion detection, fire and life safety." Those areas are not particularly high growth, but they tend to have higher gross margins and are compliments to what Anixter security previously offered.

Another major area emphasized was leveraging Anixter's 'expertise' in IP:

"One of the real advantages of putting Anixter and Tri-Ed together comes from, is you get significant expertise in Internet protocol-based security that comes from Anixter which -- that the Tri-Ed team can access to sell into their customer base."

However, as Anixter admits, Tri-Ed's core customer base are "smaller integrators and installers" who are prime candidates to jump straight from SD analog to fast growing HD analog, continuing to avoid the cost and complexity of IP.

Tri-Ed Exec In Charge

Typically, management from the acquiring company is put in charge of the entire combined operations. Not here.

"Pat Comunale [link no longer available], the former President of Tri-Ed, is now leading our $1.7 billion global security business."

Comunale [link no longer available] is an old school security guy. Now he is not only running the ~$570 million Tri-Ed side but the entire existing $1+ billion Anixter security business focused on the mid to high end of the market.

6 months ago, Anixter acknowledged internal problem an 'execution problem' and outgoing security business leadership / management. Then they made a senior level management change in May. Now, the former Tri-Ed President, Comunale is in charge of everything security.

Anixter is clearly making a very big bet that no only can Tri-ed's market focus reinvigorate them, but that their executive can do so for security overall.

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