NEW YORK ( TheStreet) -- By 2020, investors are likely to see billions of devices connected to each other largely through home and office automation systems and driving a global market worth trillions of dollars, according to research firm International Data Group.
This trend toward the pervasive use of connected devices called the Internet of Things (IoT), where, for example, a smartphone can remotely arm a home security system or set a thermostat, is expected to increase dramatically over the coming years. A survey of tech-savvy homeowners in June found that 61% of survey respondents queried by Fortinet (FTNT) agreed that the connected home will be a reality within the next five years.
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"The ultimate winners of the IoT-connected home will come down to those vendors who can provide a balance of security and privacy vis-à-vis price and functionality," said John Maddison, vice president of marketing at Fortinet, a provider of network security solutions.
Nortek (NTK) , a Providence, R.I., based diversified industrial company, is one vendor that stands to benefit from the Internet of Things movement and adoption of smart homes and smart buildings. The company released its third-quarter results on Monday and increased its net sales to $642.9 million from $589.2 million a year ago.
"In the technology side of our business, net sales in our [Security and Control Solutions] segment increased 5.9% year-over-year to $104.2 million, due primarily to new customers added this year in the security and home control space," Nortek CEO Michael Clarke, said in a statement. The company's earnings of 29 cents per diluted share, however, missed Wall Street's expectations of 49 cents, according to analysts surveyed by Thomson Reuters.
Nortek's Security and Control Solutions segment includes its subsidiary Linear, as well as its 2GIG Technologies business. Linear offers wireless and wired products, while 2GIG Technologies allows users to manage their home automation and security system via a touch-screen display panel, the Internet or a personal digital assistant.
Linear, along with Nortek's other subsidiaries, allows the company to supply everything needed for a smart home or smart office building. A smart home typically allows a range of connected features in the following categories.
- Heating, ventilating and air conditioning (HVAC)
Control of each category is required, and smart systems include a central control panel for on-site control, with wireless options and smartphone solutions also available for remote access.
Nortek has positioned itself in all of these five categories with products that can be connected together wirelessly and controlled through one panel. They can also be accessed remotely via an app on a smartphone or computer.
What gives Nortek an edge is that not only does it have products in each of these categories, but the products will also communicate and operate well with each other because they all come from the same vendor.
There is no universal standard for smart homes and with hundreds of devices, apps and manufacturers available, the ability for devices to communicate with one another often becomes an issue. Security of the IT networks and the initial cost of installation are additional barriers to adoption.
However, Nortek remains bullish.
"We expect Nortek to conclude 2014 with a solid fourth quarter and deliver increased profitability for the year compared to 2013," Nortek’s Clarke said.
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At the time of publication, the author held no positions in any of the stocks mentioned. This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.