UTC Acquires GE Security Examined

On November 12 2009, UTC announces an acquisition of GE Security for $1.8 Billion [link no longer available]. GE Security would likely become a division of UTC Fire and Security [link no longer available]. 

UTC Company Profile

Despite UTC Fire and Security generating about $6 Billion in annual revenues [link no longer available], their product portfolio in security is shallow. For instance, 60% of revenues are from service and installation.

Access control is a strong area with their Lenel [link no longer available] division being one of, if not the leading, physical access control manufacturer (acquired in 2005 for $440 Million as noted inUTC's 2005 Annual report [link no longer available]).

The overlap between GE's Casi Rusco product offerings [link no longer available] and Lenel will be significant. Both product lines have substantial customer deployments but Lenel's product development over the last 5 years has far surpassed that of GE Security's physical access control. Does UTC keep both? Do they wind down the GE product line or spin it off? Lenel's product strengths give it a clear edge over GE Security's offering and likely spells more troubles for GE Security's access control customers.

UTC is weak in video surveillance and the additive effect of GE Security's video is questionable. Lenel lags in video surveillance and earlier this year partnered/OEMed their video to OnSSI.

Feedback on UTC Acquiring GE Security

SSN has extensive feedback and commentary from a UTC executive and an industry analyst. Additionally, UTC specifically calls out the Edwards fire business as a key strength. UTC wants to increase service revenues from the more traditional product business of GE Security. However, the problem with the video and access businesses are that the products are weak. It will be hard to drive up service revenue in the long run based on a weak product portfolio.