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Control4 and HANs: Big Market, Big Lead and Big Competition By Jul 7, 2009 - 11:13:12 AM
In Brief: Control4
Control4 offers a platform of hardware and applications software for the digital home. Using a home controller or Internet connection from anywhere in the world, consumers can manage scalable, modular systems for home energy management and automation, home entertainment, and home security. The systems are easily installed in both existing and new homes through wireless or wired technology.
The home management system utilizes
Control4 products offer strong utility capabilities with embedded basic data collection and analytics to track energy consumption. When carried back to a central system through smart meters, that data sets up the potential for energy efficiency recommendations and dispatchable demand response.
Strengths
New venture capital investments totaling $17.3 million announced July 8, 2009 will be used for Smart Grid product development and sales channel extension. Investors include Best Buy Capital, Mercato Partners, and University Venture Fund.
Sales in 2008 were $57 million. At midyear 2009, sales were up 30% over the midpoint 2008 with expectations for $70 million plus by year end, likely becoming cash flow positive in the third quarter. Today, roughly 90% of the revenues come from the hardware side, but management expects the systems revenue to match hardware revenues in the future.
The company has introduced a new, low-cost product for energy management – the EMS-100. The package contains a controller and wireless thermostat, making it an enticing promotional tool for utilities to nudge customers toward better energy efficiency. The bells and whistles incorporated into the controller, weather display, clock alarms, personal photo feature, and Web or security cams may be the glitz that attracts customer interest. Embedded functional features include connection capabilities to the utility's ZigBee HAN, compatible smart meters, lighting and appliance controls. The low investment threshold, around $150 in large quantities, could establish critical mass adoption that will provide entree for Control4’s other modular components for home entertainment and security.
The company is building an ecosystem of certified devices that can be guaranteed to work seamlessly with its controllers – numbering about 5,500 today. Additionally, a group of "Intel Inside" partners are embedding Control4 technology inside their devices, including heavyweights such as Sony, Pioneer, and Panasonic. As a founding member of the ZigBee Alliance, Control4 is influential in shaping new standards. Control4’s IHD runs Linux and supports Flash, giving programmers easy ways to write widgets or even full-scale custom applications.
The strong dealer channel is comprised of high-end audiovisual and home security installers. Control4 is creating a broad retail presence with partners such as Best Buy and its Geek Squad. Testing multiple distribution channels gives the company an edge over the competition for a) nationwide sales, b) installation and c) tech support.
Challenges
Control4 has big competition in the HAN market – the likes of Google, Microsoft, Intel, Sony and other tech giants who want to own the operating system for the digital home. Already established competition in the new home systems and high-end retrofit space include Crestron and AMX.
While sales growth is impressive, economic woes in the housing markets have likely muted demand for home area networks as fewer new homes are being built and homeowners have hunkered down to control costs. Discretionary spending on this type of “luxury” item could remain below potential for an extended period of time, giving competitors time to establish a foothold.
Dedicated “green” consumers may be first adopters of home energy management solutions, but quantifiable economic benefit and/or low investment threshold will be critical factors for broad adoption by most households.
Our View
The HAN market could be as large as $3 billion annually within the next three years. The key to reaching this potential will be to provide the capabilities that utilities need while also giving a compelling reason for consumers to want these things in their homes. Control4 has the best answer we've seen so far. The company combines technical specs robust enough for the most demanding utility and an interface easy enough for the most tech-averse consumer. Control4 has shown startlingly good performance in a recession year, especially in a sector tied so closely to home construction and home sales.
Control4 has also built itself into the closest thing yet to an integrating platform. Its lead is due partly to its technology, partly to its channel strategy, and partly to its partnering programs. But again, can it maintain that lead against the world’s richest tech corporations? Its strategy with the new EMS-100 unit certainly shows promise. If utilities adopt and subsidize the placement into homes, millions of the devices could be in use over the next few years. Once they have a Control4 IHD, consumers will start adding new widgets and buying Control4-compatible A/V gear because that same touchscreen will also act as a remote control.
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