WILL AMAZON’S RING SYSTEM RUN ADT OUT OF HOME SECURITY?

From bookstores to shopping malls to supermarkets, Amazon has roiled many a long-established business model.

Now, the Amazon effect is shaking up an unlikely industry: home security systems.

Shares in Boca Raton-based ADT, the security provider that went public in January, took a fall after Amazon in February announced its $1 billion acquisition of Ring, a maker of systems that connect doorbells with security cameras.

Ring lets homeowners view security footage from theirmobile devices.

Amazon’s move opens the possibility of the Seattle giant disrupting the new market for do-it-yourself home security, a fast-growing category that threatens to squeeze ADT and its long-established model of installing elaborate systems and insisting on four-year contracts.

Amazon’s move into home monitoring fits nicely with its new service that lets customers unlock their doors for deliveries or for services such as cleaning.

“They have all the infrastructure of the cloud and the security cameras, so it just makes sense,” said Tyler Vernon, chief executive of Biltmore Capital, a money manager in Boca Raton.

Then there’s the matter of the cost and inconvenience of home security systems. According to Consumer Reports, signing up for service with ADT would cost $2,425 over five years, including $925 for hardware. Do-it-yourself systems are significantly less expensive, costing as little as $620 for hardware to cover 15 windows and two doors, and nothing for monitoring.

Venture capitalist Jason Calcanis appeared on CNBC recently to predict ADT will be hit hard by the move to cheaper do-it-yourself security service.

“The big loser in this will be ADT and those kind of folks,” Calcanis said. “People absolutely hate that company.”

Investors have taken note. On the day of ADT’s initial public offering in January, shares traded as high as $12.97. After hitting $13 in February, ADT stock has headed down, falling as low as $7.55 this month.

Shares bounced back to $9.06 as of April 24, but ADT still is off 27 percent for the year.

Amazon isn’t the only tech company eyeing ADT’s market. Google owns the home-technology company Nest, which is pushing cheaper alternatives to traditional security monitoring.

In a March conference call, ADT Chief Executive Tim Whall acknowledged new competition from tech giants.

“Now you see Google Nest coming out there with products,” Whall said. “You see Amazon, potentially Apple.”

Whall put an optimistic spin on the rise of cheaper options. Lowcost do-it-yourself security might spur more renters and homeowners to invest in surveillance cameras, he said. And that entry-level investment might spur consumers to pay for professional monitoring, rather than skipping security altogether.

“I think this is positive,” Whall said. “For years, we’ve talked about driving penetration rates past 20 percent, and perhaps this is one of the things that will help us with that.”

In 2017, ADT began a partnership with Samsung to market what Whall calls “the less-sophisticated systems.”

The cheaper offering is geared to an apartment dweller who might need just two or three cameras or sensors, rather than the owner of a large house who needs 20 or 25 cameras.

“We’d love that if they started that relationship with ADT earlier in their lives and built on it from there,” Whall said.

For 2017, ADT reported a net income of $343 million on revenue of $4.3 billion.