Pelco Sale Sends Electricity Into the Air
It was inevitable I suppose. Yet it feels no less shocking that Pelco — the fiercely independent CCTV equipment manufacturer as famous for its world-class products as its Shangri-La-like campus in Clovis, Calif., where cheery employees practically whistle while they work — has named its price. That price, around $1.5 billion, is being forked out by French global electrical and building automation conglomerate Schneider Electric.
Regardless of what the future portends for Pelco, this transaction marks the end of an era for the company as well as the electronic security manufacturing industry. A handful of remaining notables such as NAPCO and DMP notwithstanding, Pelco is the last and most ostentatious of its breed — a fully self-contained model of American ingenuity, ambition and spirit.
Pelco was founded in 1957 but really began to take shape after being acquired by a David McDonald-led ownership group in 1987. At the time, Pelco only offered a few basic positioning systems and enclosures. During the next 15 years it grew an astounding 30-fold.
Those accomplishments were the result of elevating customer service standards, with guaranteed on-time delivery; 24-hour technical assistance; one-day turnaround on service repairs; single-day replacement parts service; and 100-percent guarantees. All the while, high emphasis was placed on employee satisfaction and morale.
This helped Pelco establish unparalleled loyalty both externally among its dealer base and internally among those responsible for serving them. Other facets of what became the poster child for U.S.-based electronic security manufacturing culture and success included production of its own glossy magazine (Pelco Press), a commitment to customer training, lavish customer appreciation events, a mobile demo vehicle, record-breaking Toys for Tots efforts and an on-site 9/11 memorial and museum.
Today, more than one million locations worldwide include Pelco products, the company’s product line tops 5,500 items and the Clovis manufacturing complex is the largest in the world. Meanwhile, Pelco’s worldwide payroll has swelled to 2,600 and in 2006 it recorded sales revenue of $506 million.
So why did Pelco finally sell? There were several factors, among them was receiving a great offer from a company with the resources, capital, R&D and global reach capable of lifting Pelco to new sales plateaus. This is particularly true in the areas of IT convergence, where it has recently invested $100 million, and geographic coverage, with recent expansion into 130 countries. Also, some believe Pelco’s owners wanted to avoid eventually passing on heavy estate tax burdens. Finally, rumors have swirled the company planned to expand into access control. Perhaps new ownership will facilitate such intentions.
Whatever the reasons, in hindsight, it now makes perfect sense that Pelco’s buyer would not be among the usual suspects, such as GE, Bosch, United Technologies, Honeywell, Tyco, etc. as most of them are either already strong in CCTV equipment manufacturing or have other mitigating circumstances. Clearly, Schneider Electric is properly positioned at the right time.
However, Pelco’s new parent will not be without its challenges. Among them are foreign ownership/management of a U.S.-based operation; large-scale integration with internal business units and within the overall corporate entity; comprehension of the industry’s unique dynamics; channel conflict and management; and overly ambitious bottom-line expectations. Furthermore, Schneider’s makeup may renew fears for some that electricians are going to “take over the industry.”
When I interviewed McDonald as part of his induction into the SSI Hall of Fame a few years ago, he told me, “I believe Pelco will always be thought of as an organization with a heart and soul — dedicated to making a positive difference in the lives of others.” Although the Pelco mystique will never quite be the same, let’s hope its new stewards never lose sight of this noble objective.
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