Stanley gets big press

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11/15/2007
The mainstream press is finally coming around to the fact that security companies exist. A couple weeks back, American Alarm got a glowing write up in the Boston Globe (check the archives), now Stanley Works gets a write-up from their home-town paper, the Hartford Courant. The general tack is that, hey, Stanley does security now, as message that Brett Brontrager said at Securing New Ground he was still having a hard time putting forward, especially amongst the investment analyst community (which lead me to wonder how good these analysts can be if they can't realize that Stanley's doing $1.4 billion in security sales, which is fairly significant and seemingly worth paying attention to). Anyhoo, this Courant article is lengthy and you might not make it through the whole thing, so let me draw your attention to a few graphs: John F. Lundgren, the CEO of Stanley Works continues to monitor Lisle, Ill.-based HSM Electronic Protection Services, which Stanley purchased about nine months ago for $544 million in cash, making it among the two largest acquisitions in the company's history. The other was French industrial toolmaker Facom, which Stanley purchased Jan. 1, 2006, for $477.6 million. HSM, which came with 50 offices, 175,000 customers and about $200 million in revenue, is seen as a key addition to Stanley's security segment because it provides security-alarm monitoring services, including video surveillance, to commercial customers. The move brings Stanley into the monitoring service business and provides a recurring monthly revenue stream that Lundgren called a missing piece of the puzzle. The automatic doors unit, Stanley Access Technologies in Farmington, was the foundation for the security division, which produced and installed doors, locks and other security equipment. "Our problem was we were taking on too many installations, period," said Lundgren, who said there isn't enough margin in that business. HSM gave Stanley a far better cost-estimating model and the "mind-set that you don't do installation without service," said Lundgren, 56. HSM enables Stanley to sell lucrative service contracts along with future upgrades, Lundgren said. "We love office buildings. They tend to pay their bills and not move," Lundgren said. "At HSM we like the business and service reputation and the management team and we like the business model. It's very service-driven and there is the recurring monthly revenue." Today Stanley's security business is $1.4 billion; of that $800 million is mechanical doors, locks and hardware and $600 million is service and install, repairs, upgrades and monitoring, Lundgren said. Does that ring any holy-crap-service-is-important bells? It's weird how everyone's finally jumping on board with this. Definitely makes Cliff Dice look smart in this op-ed from 2002 (yes, five years ago). Our editors were on top of remote video five years ago, too. I could find 100 examples if I tried hard enough. When everyone agrees that recurring service revenue is way better than living installation to installation, and that just sort of makes a priori sense, who are these integrators who are in love of the installation revenue and low margins? I don't seem to mee them very often. Feel free to use the comment button to tell me what I'm missing here.