ADT may have a marketplace but it is like an old flea market. Many are dependent on Google yet Google cries into the pillow at night knowing a book company has beat them all. Ring is just the tip of the iceberg and the plateaued spy economics of Google tossing such a small saturation into ADT is supposed to ring the bell? This looks more like a pause rep so Google can rest just a bit longer while Amazon goes hard everyday. Google is winded and out of shape, and is not playing well as an American. If the truth is revealed is Google even an American company anymore?
It will be interesting to see what happens to companies like Honeywell, DSC and Qolsys who have been equipment suppliers to ADT and their dealers. It looks like ADT could be launching the Nest/Google Home platform as a new hardware solution.
ADT's stock chart yesterday was interesting, it exploded to start, nearly doubling, but then fell $3+ the rest of the day:
Still, great gains for ADT stock on the deal, curious how many stockholders were excited to exit and capture the surprise gains. More importantly, I wonder where the stock price will trend for the rest of the year. It could certainly continue to gain, I am not sure.
This actually makes sense. Google, at the end of the day, is in the business of collecting data. ADT has a large base of customers who willingly put monitored technology in their homes. Swap out the equipment, and Google can now have more data.
The bigger question in my mind is, how long until people realize what's happening, and if they already know, how much of their privacy are they willing to hand over?
ADT's main point is that Google and ADT are making a combined effort in the partnership, developing products and spending on the "next generation", though it will be interesting to hear Google's perspective, as they were not on this call.
Is ADT's reliance on Google stronger than vice versa? Read below:
ADT states mutual development on future products, but the below statements call into question ADT's reliance on Google's advanced technology:
The "Next Generation" will be about AI and leveraging video analytics and data analytics
[Excited about] Google's growing capabilities in ambient computing, false alarm reduction, verifying response, video and data analytics, launching products in our DIY segment, and yes commercial
Spending as shown in the contractual agreement is $150 million from both parties, but this spending may be surface level compared to the value adding dollars:
The $150 million "funding growth fund" is largely dedicated to three areas: the first is co-marketing, the second is joint product product development, and then lastly we're investing int raining of our own employees – our customer training employees, our techs, and our sales that are associated with this partnership
Not unimportantly, the $150 million doesn't include the extensive internal investment that Google will be making - engineers, talent resources, development resources - are all separate from the $150 million
CEO Jim DeVries clearly states ADT's plans to transition its "product agnostic" history to exclusively selling Google hardware. Will Google be operating similarly?
We've been historically product agnostic. For example, if a customer asks for Amazon Alexa Integration, we will still provide that
Now we will be working more in alignment with Google and their hardware
We will be exclusively selling some of the Google devices on the home install side
On the DIY side of the business it will be both google devices and ADT blue. You can think of it as forming an alternative on the DIY side
Google will eventually be an exclusive hardware provider for DIY and commercial installs
ADT also acknowledged it will be having difficult conversations with its existing platform partners and possibly changing its backend on ADT Command:
Alarm.com continues to be a customer for now in ADT's Command and Control Platform
Later this year, several hardware pieces are going to be integrated into existing ADT Command system, like Google Home and Google Nest Wi-Fi
We will begin building an altogether new product together and rolling out in 2021
ADT says the security market is growing and professional services are important for Google's smart home recurring revenue, but automated smart home capabilities are clearly the prized asset for ADT:
Pro install has pretty consistently had better customer retention trends [for smart home devices]
The security industry has long demonstrated consistent growth even through challenging and recessionary periods
The smart home market is seeing even more explosive growth [than security] and is projected to grow at 20% annually
Brand And Overall Impact
ADT's explanation of what both companies' brands bring to the deal is telling in terms of actual advantages, with Google representing technology and ADT representing "trust":
The brands are one of the things most exciting about this - we get the benefit of Google as a tech forward and contemporary company, and then Google gets the ADT brand as representing trust and peace of mind
As of now, ADT is excited about Google for its re-branded "future" smart home security products, and they use the $450 million as evidence Google has "skin in the game" and is focused on the long term.
It is to be seen how or if Google will use ADT to brand its smart home offerings, whether they will sell ADT exclusively, or use the company as one channel partner in their own smart home strategy.
Interesting move. This will help our company. We thrive in the “I hate the big companies” arena. Anytime I mention ring is owned by amazon our clients say no thanks. Competing with ADT on a local level will be easier if Google acquires them. My biggest fear/concern is how this will impact our SEO and ad spend.
Prior to closing, Google has the unilateral right to purchase, for the same price per share, additional shares of Class B Common Stock such that, immediately following the closing, Google holds 9.9% of the issued and outstanding common stock on an as-converted basis. Google has indicated to the Company that it does not currently intend to exercise the option.
This additional stake amounts to 27,372,263 shares added to the 54,744,525 shares already sold to Google.
With Google "not currently intending" to exercise the option, at a steeply discounted price of ~$8.20 compared to the stock price of ~$12, investors are bearish on ADT's long term prospects as a Google partner or a potential acquisition.
In my community garbage is collected weekly… when it is setting at the curb. ADT does not even set out its garbage. Maybe holding the smelly stuff for recycle, but can’t find a recycler…. Google can give directions.
so based on that graph, the only investors that could possibly have benefitted from this move (at least at the stocks current price) are those that may have known of the deal before it actually went public and bought before the announcement? (which, of course, is not legal)
i.e. if you bought after the day it spiked on news of the deal, you have lost money?
I would not make any accusations of insider trading.
More broadly, various investors could have thought the stock was undervalued prior to the deal and then cashed out after the bump. Or they could have held the entire time and had their short term gains wiped out.
the only investors that could possibly have benefitted from this move (at least at the stocks current price) are those that may have known of the deal before it actually went public and bought before the announcement? (which, of course, is not legal)
You asked a leading question claiming the only' way is illegal.
No, people move in and out of stocks for various reasons. For example, let's say someone bought in late March / early April:
They could have seen the Google announcement and decided to exit to lock in their returns.
The big ongoing loser in this seems to be Apollo (their investor / 'owner'), they try and try and the stock keeps on coming back down.
you are right. my insinuation that insider trading was the 'only' way that investors could increase their position was wrong.
legacy investors could have used the spike to unload stock at a profit immediately after spike day.
but would they have done such a thing on that day?
imagine that you have owned this stock for years and you just learned that it's value has dramatically increased due to a big name new investor. do you think most investors would divest and take the immediate windfall?
or would most long-term investors in this stock do nothing and expect their positions to increase after spike day?