Tyco Sale of Sonitrol in the Works


Expect most of Tyco Fire and Security’s upcoming
divestitures to come from its fire-related companies,
though it appears Sonitrol Corp. is on the block. That’s
the word from Tyco Fire and Security President Dave
Robinson in a meeting with investors, where he also
discussed ADT’s increasing reliance on direct sales ahead
of dealers.

Robinson said during the Feb. 18 conference call that Tyco
is talking to several buyers for Sonitrol and expects to
complete the sale by the end of March. The security
monitoring company, in business since 1963, was acquired by
Tyco in 2001. Robinson says the ending of Tyco’s
relationship with the company shouldn’t be a negative
reflection on Sonitrol.

“We had great interest in it because it’s a great business.
It’s going to do well with a new buyer fairly soon,” says
Robinson, who adds that Sonitrol’s operations are in
conflict with Tyco’s security powerhouse, ADT. “These
businesses aren’t bad businesses by and large. They’re just
not part of what we do on a daily basis or there are
conflicts with our other businesses.”

Since Tyco
announced in November plans to divest
itself of nearly
25 businesses in its Fire and Security segment, Tyco has
sold four small security firms overseas. While Sonitrol
will be its largest security divestment in the States,
Robinson says the company’s fire segment is targeted most
in Tyco’s restructuring.

“Most of our divestments will be in the fire area. With
fire, we’re not happy with the level of margin we have
today. Our strategic focus is the electronic security
market,” Robinson says. “Even when we’re running on all
cylinders, our fire segment runs at a relatively lower
margin than our security businesses.”

Robinson was upbeat that ADT has made progress with
institutional changes in the past year, including adding up-
front payments, raising credit requirements and an
increased resale effort. He also says ADT, which was losing
money on its dealer program and reliance on acquitting
dealer accounts, has been reducing its dependence on
dealers. Dealer spending at ADT is down 70 percent since
2002, according to Robinson.

“Our dealer program was not economically viable in some
markets,” he says. “Our focus is increasingly on internal
growth through direct sales.”

Robinson touted the new blood on Tyco Fire and Security’s
management team – six of the nine top executives have less
than a year in their positions, including Robinson – and
anticipates future growth among Tyco’s security businesses,
directing a comment at some of his competitors.

“GE and Honeywell tend to focus on the products area, but
that’s nowhere near the size of the service segments we
participate in.”

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