Technology is acting as disruptive innovation in the security industry. ADT is at risk of losing its position as the leader in the North American security industry in the long term. Changing market dynamics will provide additional headwinds for the company, favoring new entrants.

The ADT Corporation (NYSE: ADT ) was originally founded in 1874 as a telegraph delivery company. ADT was not involved in the security industry until 1910, when it explored fire and burglary alarm offerings.

Over a hundred years later, the company has developed into the leader in the North American security industry.

It has, by a large margin, the most subscribers at 6.4 million as of Q3 2014, not including subscribers obtained from its acquisition of Reliance Protectron.

Currently, ADT operates from a position of strength, due to the following factors:

• The company operates through a multi-channel model, primarily utilizing both a network of dealers (one of the widest within the industry), an internal sales team, and referrals from various third parties;

• Its extensive history leads to its strong reputation of reliability and expertise;

• High visibility of cash flows and economies of scale due to an established customer base;

However, the company operates within an industry that is rapidly changing, in large part due to technological advances.

In recent years, there have been a number of entrants into the market that have put significant competitive pressure on ADT, and this is a trend that will no doubt continue in the long term.