ADT / Tyco Security Installation and Product Revenue Continues to Decline

Weak results and a poor outlook for the integration business is a concerning sign for the physical security industry at large. The sharp decline in ADT's System Installation and Tyco Security's product revenue continues in Q409, entering a second year of declines.

As the Tyco Quaterly review (Fiscal Q109 / Calender Q408) shows, ADT's system installation and service revenue declined 13% between Q409 and Q408. Furthermore, Electronic Security Products (DVRs, Access Control, etc.) revenue declined 10% in the same time period.

This is especially interesting because the comparison is against Q408, the first quarter after the September 2008 market implosion and therefore reflects an already weak economy. For instance, Tyco reported weakened sales and declining revenue for these categories in Q408. This now makes two years of back to back revenue declines.

The good news for Tyco is not good for the traditional video surveillance industry. They attribute positive momentum to recurring revenue and costs cutting offsetting the declines in system installation and products. From the Fiscal Q109 analyst call transcript:

"Our results for the quarter continue to be driven by our cost management and restructuring efforts as well as the continued strength of our service and recurring revenue business which represents over 40% of our total revenue. It is these actions coupled with the growth of our service business which have largely offset the impact of lower revenue in our product businesses and in our systems installation activities at ADT and Fire."

Given ADT's large size, weak results and a poor outlook for the integration business is a concerning sign for the industry at large.