"Grand Slam" For Pelco's PE Firm, A Risk For Motorola

By John Honovich, Published Aug 07, 2020, 10:41am EDT (Info+)

The word "Pelco" and "grand slam" have not been said together for many years. But the PE Firm, Transom, who flipped Pelco to Motorola is celebrating just such a moment.

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At the same time, Motorola's CEO has disclosed more financial details about Pelco giving a better sense of where Pelco is at and what Pelco will be costing them going forward.

We examine why Pelco's previous owner is so happy and whether Motorola will be as happy with their Pelco purchase in the coming years.

******** ***** ************* ******* ** ********:

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**** ****** ** ****** *********** ********* * ***** ******* *** ***** ****:

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*** **** *******, ***-******* ***** *** the ****** ******* ****:

********* ** ** ******** ******, ******* recorded *12x ****-**-**** ****** on its investment in Pelco.

**** ***** ******** **** ** ************ * *** ***** ********:

*** **** ****** * ** ***** cash-on-cash ****** ** *** ****, ********* to * ****** **** ********* ** the ****.

12X ******

***** *** ***** ***** ** $*** million, **** ******* **** ******* ******* paid $** ******* **** ** ****** ago. ***********, **** ***** **** ********* on *** **** **** ******* **** or ******** **** ********* ***** **** the **** ** ******.

Transom ** ******* ***** ******

******* ******** *** ******* ** ****.

*******, *********'* ************ ** *** ***** ****, **** ********** "*****" ******* ** key ** ***** ******:

***** *** *********** ** *** ******* in *** ****, ** **** ************ executed *** ************ ******** ******* ** ********* *** operations *** ********* ********* ** *** Company. *** ********** **** ****** * critical **** ** ******** * ********* infrastructure **** ******* ***** ** ****** its ******* ** ** ******** ******* video ******** ********* ********.

***********, ***** *** ********** *** ******** 'its ******* ** ** ******** *******' anything.

** *** ******** ****, ******* *** not **** ***** *** ** *** not **** ** *** ***** ****** or ******** ** *** **** **** so **** *** ****. *******, ** never ****** ***** ** ** *** Transom *** ***** ** ************* ******* Pelco ***, ***** **** *** *** really ***** ***** ****, ** *** minimal ***** ** ************ **** ***** development ****** *******'* *********.

Transom ****

**********, ******* ** *** ****** ****. Whether **** ******** *** * *** return ** ******* ** ** ***, at *** **** ** *** **** Pelco ****, ******** ********** ********** ****** about * ***** ***** ***** ** the $** - $** ******* *****.

***/***, ** ******** ****** ****** ****** to *** *****, *********, ********* ******** 14 ****** ***. ***, ******* *** a **** ***, ** *** * grand ****, ** ******** ** ********.

Motorola ******* ***** ********* *******

** *** **** ****,********, ** *** ** ********'* ****, ******** **** ********* ******* ***** Pelco *** **** **** *** ****. Motorola ******** ***** **** **** **** revenue ** ** ~$*** - $*** million *** **** $** - $** million **** **** **** ******** **** in ***** ****** ** *** *** of *** ****. **********, ***** ******* ~$200 ******* ****** *******, ***** * steep **** **** *** ***** ***** at $***+ ******* ****** *******.

********, ******** ******* ** "*********** $** million ** **** *** *** ******* of *** ****" ** *****. ** expect **** ** ** **** ******** investing **** ***** ** ***** *********** losses ** **** **** ***** ** odd ***** ****** $*** ******* *** the *******.

Won't **** ** ***** ********

***** *** ******** ** ******** $*** to $*** ******* (********* ** ****** Pelco **) ***** **** **** * lot, ******** *** * ****** ************** of ~$** ******* ** **'* ******* a *% *** *** ********. ** it *****, *** ****** **** **** not ** ****.

*** ******** **** *** **** ***** be ****** ** ** ************ *** core ** ***** ***** ************ ********, Avigilon.

Motorola *** ********* ***** ****

******** *** ***** ***** *** **** for ***** ******** ** ***** *** marketing **********:

*** *** ****** *******, *** *** second *****, *** *** ************* *********, use *** ****** ********* **** *** federal ****** **** ***** ******* ****.

***** ** ** *** ***** *****'* global ******* ** **** ******, ***** brand *** **** *****, ***** **** have ** ************* ********* *** * presence ** *** ******* ****** **** can **** ********.

** ** ***** $*** ******* + tens ** ******** **** ** ***** it **** **? ** ** **********.

Vote / ****

Comments (14)

When we are finally able to evaluate what Pelco did or did not do for Motorola, I think we are going to find that the only entity to make money on Pelco in the last decade will have been Transom.

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We all know Pelco was great back in the day, then they missed their window for the move to IP and it's been downhill ever since. Motorola can probably get some mileage out of the brand - especially in Latin American and The Middle East. However, it's going to take a lot of camera sales to earn back the huge investment that's been made. I think this is a bad deal for Motorola.

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Total grand slam for Pelco. I know for a fact that they were on the streets begging manufacturers to buy them, and noone bit for years. The name still holds a tiny bit of value in outdated dinosaur architect worlds and long tenured government employees, but that name will disappear when those people go out to pasture.

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I think we underestimate stateside what a gold mine of relationships/contracts Pelco has in certain, quite profitable international markets and verticals. The visible dissolution you watched first-hand in the US market was handled much more gracefully and successfully by their international employees/partners. They withstood the relentless Chinese invasions, the Onslaught of Avigilon, the Axis of Canon and not to mention real wars on their borders in some cases!

I wouldn't call it a slam dunk but I think this was a simple, fast-break layup for Moto as well!

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Pelco! We always keep one leg in legacy!

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50mm purchase acquired for 20% down would be 10mm. So yes if it was sold for 110mm and they did the deal debt free cash free and took out the cash at sale to Motorola its entirely possible.

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acquired for 20% down

That works for buying a house but I am not sure about a distressed business! :)

It is possible that debt plays a role in the return metric though I am curious how much debt one would be allowed to use with an asset like Pelco.

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Whatever happened to the Pelco factory in Clovis, CA? Perhaps Motorola is looking to expand the Avigilon Made in America capabilities?

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The Pelco factory was closed in 2017. Motorola has Avigilon's factory in Texas which Motorola said is the plan for making Pelco in the USA.

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Pelco and Indigo Vision deals are good to Motorola, as it will give them access to more and more federal projects and huge customer base in the Americas and EMEA. But will not be as good for the Axis and Avigilon, as now they are the only major surveillance manufacturers in EU and NA, which will not be the case moving forward and in a way or the other, Avigilon will have competition to sister Motorola Solution companies. For sure, this is in case Motorola decides to continue with the three brands without consolidation.

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It's likely a great deal for Motorola.

Technology-wise, Pelco have been behind the times and it's hard, when you don't have the cash, to invest in enough R&D to get ahead of the current Avigilons etc.

Pelco's sales and relationship network though, the staff that understand how to sell to Government / public entities (and the purchasing folks on the govt/public side of those sales knowing Pelco), is a great asset. I'd be wary to underestimate someone that's learned to thrive in an environment where the sale can take years to setup, let alone a staff of them.

If nothing else, Motorola could put Avigilon tech in Pelco housings and have an industry-competitive product catalog, ready to win even more RFPs. Further marketing effort in making Avigilon maybe the high-tech/cutting edge brand and Pelco the industrial/high-volume/public brand can grow their overall market penetration even further. Protect the price point of Avigilon by discounting the Pelco products a little (save some of the best features for Avigilon as an up-sell) and Pelco could start directly competing for the cost/value-conscious buyer's lunch.

Pelco I think also has a larger network overall than Avigilon outside of the US/Western Europe. I see the name (subjectively) a lot on hardware in subways, airports, etc. when I'm traveling. Not bad to buy the welcome mat and roll it out for yourself :)

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Pelco's sales and relationship network though, the staff that understand how to sell to Government / public entities

Pelco has had a lot of employee turnover over the past few years so not sure how much the staff understands now. They could, I could be wrong. I also think lots of government / public entities still trust or at least recognize the Pelco brand.

Not bad to buy the welcome mat and roll it out for yourself :)

Agreed, though the question is how much to pay for the welcome mat...

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Recently made a Pelco purchase for the first time in years due to the customer ( a large multinational) having Pelco specified for this facility. We were not surprised that the specified head end was discontinued several years ago. As we are subcontractors on this project, our effort to reach the specifiers and educate them to a better solution was dismissed - too much trouble. If the value is in antiquated specs among entities too lazy to stay current, then they probably overpaid.

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I am curious to see if this is how Motorola will get Avigilon products into disti without theoretically doing a disservice to Avigilon dealers?

Motorola needs bigger numbers out of Avigilon, some of the sales team have already stated that their targets are unreasonable.

Avigilon also re-evaluated dealers in March and a vast majority of them were downgraded from 40% off to 30% off. Those dealers will now need to either register all their projects with the goal of still getting 40% off or exceed a lofty sales target each year to retain 40% off. This new sales target is now 3x higher in comparison to the previous sales target.

Doing this in March was in very poor taste, it points to unreasonble goals stemming from Motorola possibly infuencing sales leadership to implement this re-evaluation at an obviously bad time.

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