ADT 2007 Annual Report Download - page 103

The other major customer segment, representing approximately 25% of revenue, is the OEM
market. Steel tubing supplied by Electrical and Metal Products is ultimately used as a component for
OEM products in automotive, commercial or industrial end markets. Steel tubular products are sold
direct to OEMs or, in the case of automotive components, to suppliers.
Competition
The market for electrical conduit and wiring and supports, fire protection and security products
and steel tubing includes a broad range of competitors. Our principal competitors range from national
manufacturers to smaller regional players. Our customers purchase from us because of the quality and
breadth of our product line and the availability of our products.
Foreign suppliers, especially those in China, Turkey and India, also aggressively pursue the
sprinkler pipe and fence pipe market through their standard pipe offerings.
Backlog
See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations for information relating to our backlog.
Intellectual Property
Patents and other proprietary rights are important to our business. We also rely upon trade secrets,
manufacturing know-how, continuing technological innovations and licensing opportunities to maintain
and improve our competitive position. We review third-party proprietary rights, including patents and
patent applications, in an effort to develop an effective intellectual property strategy, avoid
infringement of third-party proprietary rights, identify licensing opportunities and monitor the
intellectual property claims of others.
We own a portfolio of patents that principally relates to: electronic security systems; fire detection
systems; suppression systems; fire extinguishers and related products; integrated systems for surveillance
and control of public transportation and other public works; fire protection sprinklers and related
systems and products; structural and electrical tubing and conduit; building structural members, panels
and related fixtures; concrete reinforcing products; fire-rated and armored electrical cabling; heat
tracing and floor heating systems; security wire and fencing; and flow control products, including valves,
actuators and controllers and airflow control and sensing products. We also own a portfolio of
trademarks and are a licensee of various patents and trademarks. Patents for individual products extend
for varying periods according to the date of patent filing or grant and the legal term of patents in the
various countries where patent protection is obtained. Trademark rights may potentially extend for
longer periods of time and are dependent upon national laws and use of the marks.
While we consider our patents and trademarks to be valuable assets, we do not believe that our
overall competitive position is dependent on patent or trademark protection or that our overall
operations are dependent upon any single patent or group of related patents.
Research and Development
We are engaged in research and development in an effort to introduce new products, to enhance
the effectiveness, ease of use, safety and reliability of our existing products and to expand the
applications for which the uses of our products are appropriate. We continually evaluate developing
technologies in areas that we believe will enhance our business for possible investment or acquisition.
Our research and development expense was $121 million in 2007, $112 million in 2006, and
$113 million in 2005.
Raw and Other Purchased Materials
We are a large buyer of metals and other commodities, including gas. Certain of the components
used in the Fire Protection Services business, principally certain valves and fittings, are purchased for
2007 Financials 11