The ADT Corporation (ADT), a leading player in the residential and small business security market, is set to explore new horizons as it seeks to establish a foothold in the commercial market. To date, a non-compete agreement with Tyco International Ltd. (TYC) has restricted ADT’s operations into the commercial security market.
Presently, ADT’s foothold in the commercial security market is limited to small businesses that it defines as those smaller than 7,500 square feet. ADT entered into a non-compete agreement, which expired on Sep 30, 2014, with Tyco Integrated Security when the former spun off from Tyco in 2012. The agreement also prohibited ADT from offering any kind of fire installation services.
ADT has a strong presence in the growing residential and small business security market. It enjoys a great competitive advantage owing to its broad product portfolio, strong brand identity and diversified customer base.
However, ADT faces increasing competition from non-traditional security service providers. Cable and telecom companies such as Comcast and AT&T, Inc. (T) are launching interactive security services that compete with ADT’s offerings. Also, Google Inc. (GOOGL) has ventured into this arena by acquiring connected device company Nest Labs.
In order to retain its market share, ADT needs to evolve and expand its addressable market. The expiry of the non-compete agreement provides ADT with significant expansion prospects as it gears its portfolio to meet the security, video and fire detection needs of mid-sized businesses.
Specifically, the company will be targeting commercial security markets in Atlanta, Chicago, Detroit, Denver, the New York metro area, Phoenix, Philadelphia, and Seattle/Tacoma, as well as the states of Florida, California, Texas and New Jersey.
This translates into additional long-term growth opportunities for the company as it extends the reach of its business security to key commercial markets. As of now, ADT looks well-equipped to leverage its existing platform, capitalize on the profitable opportunities and capture considerable share in its new market.
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