ADT spared chopping block in restructuring

Security company considered “core” to Tyco’s Fire & Security division portfolio
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Monday, December 1, 2003

BOCA RATON, Fla. - The flagship brand in the residential security market was apparently spared the chopping block in the latest round of cuts at parent Tyco International, but ADT Security Services could still see changes in its geographic and financial makeup as a result.

Tyco announced in early November a massive restructuring plan that would eliminate 7,200 jobs and close more than 200 facilities, with more than 5,000 of those job cuts coming from the company’s Fire & Security division, of which ADT is a part. The division would also see the closure of 184 facilities and the sale of more than 25 business considered non-core to that part of the company.

At press time, company officials were tight-lipped about where the cuts would come from but spelled out that ADT, along with other major security brands such as Simplex Grinnell and Sensormatic, was not for sale.

But while Tyco is not looking to offload ADT, which has 7.8 million customers worldwide and is a major contributor to the revenues of the Fire & Security division - security products, installation and recurring charges make up 56 percent of that divisions revenues - officials confirmed that consolidation of facilities within ADT will definitely be a part of the overall restructuring. Such changes will be similar to those made in September, when ADT closed a major central station in Bradenton, Fla., which it acquired from its acquisition of SecurityLink, and in April laid off 800 employees, about six percent of its workforce of 25,000.

“The process of consolidating and combining facilities has been moving forward for some time within ADT,” said Gary Holmes, Tyco spokesperson. “We have tremendous opportunity to combine operations, especially where we have businesses that we acquired with nearby facilities that can now operate under one roof.”

By comparison, ADT’s European security business, described by Tyco officials as “bleeding,” has been “the business giving them the most trouble,” said John Mack, an industry analyst and chief executive officer of USBX Advisory Services. “We all know they did a ton of acquisitions that have duplicative overheads and there’s still room to shut down offices and rationalize businesses.”

According to a report from Prudential Equity Group analyst Nicholas Heymann, Tyco has eliminated sales of security systems by ADT Europe for no customer investment and instituted a new $1,500 down payment policy for new commercial security monitoring accounts.

“Clearly if this operation’s losses could be eliminated, it could accelerate achievement of Tyco’s targeted aim to achieve 14 to 16 percent operating margins for Fire & Security before FY05,” Heymann’s report said.