ADT 2005 Annual Report Download - page 79

Whether systems are monitored by the customer at its premises or connected to one of our
monitoring centers, we usually provide support and maintenance through service contracts. Systems
installed at customers’ premises may be owned by us or by our customers.
We market our electronic security services to commercial and residential customers through both a
direct sales force and an authorized dealer network. A separate national accounts sales force services
large commercial customers. We also utilize advertising and direct mail to market our services.
We provide residential electronic security services primarily in North America, Latin America,
Europe, South Africa and the Asia-Pacific region. Our commercial customers include financial
institutions, industrial and commercial businesses, federal, state and local governments, defense
installations, and health care and educational facilities. Our customers are often prompted to purchase
security systems by their insurance carriers, which may offer lower insurance premium rates if a security
system is installed or require that a system be installed as a condition to coverage. It has been our
experience that the majority of commercial and residential monitoring contracts are renewed after their
initial terms. In general, relocations account for the largest number of residential discontinuances while
business closures comprise the largest single factor impacting commercial contract attrition.
We are the leader in anti-theft systems. The majority of the world’s leading retailers use our
systems to protect against shoplifting and employee theft. We manufacture these SENSORMATIC
electronic article surveillance systems and generally sell them through our direct sales force in North
and South America, Europe, Australia, Asia and South Africa. A growing trend in the loss protection
industry is for security labels to be applied to goods at the point of manufacture. In most cases, we sell
these labels directly to the manufacturers or their packaging agents. We also develop and distribute
access control and video surveillance systems, which are sold through direct and distributor channels.
We manufacture certain alarm, detection and activation devices and central monitoring station
equipment both for installation by us and for sale to other installers, although we outsource some of
the electronic components we install.
The security business in North America is highly competitive, with a number of major firms and
some 14,000 smaller regional and local companies. Similarly, Tyco competes with several national
companies and several thousand regional and local companies in Europe, the Asia-Pacific region, Latin
America and South Africa. Competition is based primarily on price in relation to quality of service. We
believe that the quality of our electronic security service is higher than that of many of our competitors
and, therefore, our prices may be higher than those charged by our competitors.
Fire Protection Contracting and Services
We design, fabricate, install and service automatic fire sprinkler systems, fire alarm and detection
systems and special hazard suppression systems in buildings, industrial plants and off-shore installations,
as well as respiratory systems and other life-saving devices. Tyco’s fire protection businesses utilize a
worldwide network of sales offices, operating globally under various trade names including
SIMPLEXGRINNELL, WORMALD, MATHER & PLATT, TOTAL WALTHER, DONG BANG,
ZETTLER, ANSUL, SCOTT and TYCO.
We install fire protection systems in both new and existing buildings. Our fire protection systems
are purchased by owners, construction engineers and mechanical or general contractors. In recent years,
the retrofitting of existing buildings has grown as a result of legislation mandating the installation of
fire protection systems, especially in hotels, healthcare facilities, educational establishments and other
buildings accessible to the general public. We continue to focus on system maintenance and inspection,
which have become more significant parts of our business.
The majority of the fire suppression systems installed by Tyco are water-based. However, we are
also the world’s leading provider of custom designed special hazard fire protection systems which
2005 Financials 3