Amazon's Ring Deal May Threaten These Security Competitors

Amazon’s (AMZN) Ring acquisition hit ADT (ADT) and Johnson Controls (JCI)  Wednesday — but the home systems unit that Honeywell (HON) is looking to spin off may become the next Jeff Bezos target.

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 A day after Amazon purchased Ring, analysts on Wall Street warned that the online giant’s push into home security is an unwelcome development for companies that operate in the hotly contested market for smart home security products.

“Security has already been an underperforming sector due to a shift away from professional installers and an influx of new competitors,” Jeff Sprague of Vertical Research Partners wrote in a note to clients.

Sprague sees residential security most under pressure, where lead players such as ADT face stiff competition from DIY and self-monitoring systems. Ring’s smart doorbell streams audio and visuals to smartphones, for example.

Johnson Controls’ security products business, Honeywell’s home product portfolio and United Technologies‘ (UTX) safety and security unit likely face the most near-term risk, he added.

Honeywell said in October it’s planning to spin off two divisions including Homes by the end of 2018. Sprague said Homes could become an Amazon target.

“The announcement that Amazon is acquiring the doorbell video security company Ring probably does not help the sentiment for companies competing in the increasingly contested smart home security market,” RBC Capital Markets analyst Deane Dray wrote after Honeywell’s investor event. He has a sector-perform rating and 158 price target on Honeywell stock.

Shares of ADT, which went public in January, plunged 7% to 10.82 on the stock market today, after diving 4.5% Tuesday, Johnson Controls lost 1.5%, Honeywell gave up 0.2%, while United Technologies rose 2.1% on news of an activist investor’s stake.


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United Technologies has recently discussed a potential breakup and “at a minimum we expect them to explore the exit of Fire & Security,” Sprague said.

Mechanical lock makers such as Allegion (ALLE) could also face pressure, and Ring is already aligned with mechanical player Kwikset (Spectrum Brands (SPB)) and several emerging players, he added.

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