ADT 2006 Annual Report Download - page 66

control panels, which communicate to one of our monitoring centers (located remotely from the
customer’s premises) where alarm and supervisory signals are received and recorded. In most systems,
control panels can identify the nature of the alarm and the areas within a building where the sensor
was activated. Depending upon the type of service for which the subscriber has contracted, monitoring
center personnel respond to alarms by relaying appropriate information to the local fire or police
departments, notifying the customer or taking other appropriate action, such as dispatching employees
to the customer’s premises. In some instances, the customer may monitor the system at its own
premises or the system may be connected to local fire or police departments.
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, the Internet and direct mail to market our
services.
We provide residential and commercial 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,
retailers, 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. Some municipalities
are requiring verification as a prerequisite for police response to intrusion alarms. 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 also 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 and the Asia-Pacific region. 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 a full line of access control and video surveillance systems, which
are sold through direct and distributor/integrator channels. These products range from access control
systems designed for small businesses to integrated solutions used by some of the world’s largest global
enterprises.
We manufacture certain alarm, detection and activation devices and central monitoring station
equipment both for installation by us and for sale to other installers. We also 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 10,000 smaller regional and local companies. Similarly, Tyco competes with several national
companies and several thousand regional and local companies in Europe, Asia-Pacific, Latin America
and South Africa.
Worldwide 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
4 2006 Financials