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- ADT (ADT), the leader in monitored security services, plans to combine its sales, installation, support and professional monitoring services with Google’s (GOOG) Nest product line and Google software to initially target residential security and other smart home market opportunities in the United States.
- The $450 million deal is the largest deal in smart home since Amazon’s (AMZN) $1 billion acquisition of Ring in May 2018, and it represents the latest in a series of efforts by Google to build Nest, which it acquired for $3.2 billion in 2014, into a more substantial business and improve its performance. Given the exclusive nature of the arrangement and ADT’s more than 6.5 million residential security subscribers – far more than the two next-largest players – we foresee headwinds for ADT’s existing software and hardware technology partners, including Alarm.com (ALRM) and Resideo (REZI). But given the potential for the integration to deepen Google’s already pervasive reach into everyday life, we expect the partnership to also increase consumers’ privacy concerns and drive some to alternative solutions.
- We expect the partnership to trigger an increase in smart home industry activity, including increased mergers and acquisitions, strategic investment, and new partnerships.
TABLE OF CONTENTS
Includes discussion of AAPL, ADT, ALRM, AMZN, GOOG, SCTY, SSNLF, VVNT and one private company
Yet another move by Google after several efforts to change its fortunes in smart home
Headwind to technology partners, including Alarm.com
Privacy concerns from ADT-Google partnership may be tailwind to other players
Competitive response, including elevated M&A
IoT universe outperforms S&P 500
M&A volume remains slow but includes some major transactions
Private placement activity accelerates in discounted IoT companies
ADT, the leader in monitored security services, and internet-services giant Google announced in early August a long-term strategic partnership. Under the agreement, ADT is combining its sales, installation, support and professional monitoring services with the Nest product line and Google software to target opportunities in the U.S. residential security market. ADT plans to integrate existing Nest hardware – including thermostats, smoke alarms, video doorbells, smart displays, sensors and security cameras – into ADT’s security platform over time, as well as Google’s machine learning, video analytics and data storage capabilities. ADT intends to go to market with some Nest products later this year as they become integrated and transition over time to use Google hardware exclusively to enable all professionally installed homes; ADT plans to continue selling its proprietary Blue do-it-yourself (DIY) product.