Google buys $450m stake in home security firm ADT

The deal gives Google a 6.6% stake in ADT while allowing it to expand within the smart homes segment

(FILES) In this file photo taken on January 18, 2019 a logo is pictured above the entrance to the offices of Google in London. Google parent Alphabet reported a rare drop in revenue and profit on July 30, 2020, in a quarterly update that nonetheless topped market expectations. / AFP / Ben STANSALL
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Alphabet ’s Google is buying a $450 million (Dh1.6 billion) stake in home security firm ADT, forming a partnership that could get the tech giant’s smart-home products in front of millions of new customers.

The deal gives Google a 6.6 per cent stake in the Boca Raton, Florida-based ADT, the largest home security company in the US with about 20,000 employees and more than 6 million customers. Google’s prowess in hardware design and software will give ADT access to technology it wouldn’t be able to build on its own. ADT will begin distributing Google’s Nest home products exclusively. Shares of ADT skyrocketed as much as 100 per cent before pulling back somewhat. They were up 57 per cent to $14.40 at 11.17 am in New York on Monday. Google shares were little changed.

Distribution is key for Google because it doesn’t have a network of retail stores like Apple and doesn’t own its own marketplace like The three tech giants are locked in a battle for prime placement in people’s homes, designing appliances centered around their unique voice assistants. Google has many distribution deals with home builders and utility companies, but the ADT agreement is notable for its size and the fact that Google is taking an equity stake.

Until now, ADT hasn’t favoured one company’s products over another. This deal changes that.

“The partnership with Google is us no longer pursuing a path of product agnosticism and aligning with someone we think is the best in the business,” said ADT chief executive Jim DeVries. ADT will still integrate with Amazon’s Alexa voice assistant if customers ask for it, but in hardware categories where Google has an offering, it will be the exclusive partner, Mr DeVries said in a phone interview.

The smart home market is experiencing “explosive gains” Mr DeVries said, and is projected to grow 20 per cent annually. “Together the smart home and security market represents a tremendous opportunity for ADT and Google,” Mr DeVries said on a conference call with analysts.

Both companies will commit an additional $150m, subject to the achievement of certain milestones, for marketing, product development, technology and employee training, they said. The deal would make Google ADT’s second-largest shareholder, behind Apollo Global Management, the private equity firm that took over ADT in 2016 and helped organise an initial public offering.

Google entered the smart-home market when it bought Nest in 2014 for $3.2 billion. The unit has become one of the largest makers of internet-connected thermostats, smoke alarms and locks. In the security space, it has about 40 per cent of the market compared to Amazon’s 35 per cent, according to a 2019 research report by Rakuten Intelligence.

Amazon’s home security system Ring has been criticised by privacy and civil rights activists for working too closely with police, including inking deals where police forces give out Ring cameras to residents for free in exchange for being able to connect them into their own surveillance networks.

Mr DeVries said ADT doesn’t give cameras to police and doesn’t have hardware deals with law enforcement. On the monitoring side, ADT does work closely with police forces, who often respond when a security alert is triggered.