Vicon 2011 Financials Examined

Over the last few years, CCTV pioneer Vicon has become a poster child for the trials and tribulations of incumbents moving into the new world. In the past few years, revenue has fallen by more than 30%. Now, Vicon's 2011 financial results are in and while revenue has stabilized, profitability plunged.

Let's start by reviewing Vicon's 2011 10K financial statement:

• Total revenue is fairly stable dropping only 3% year over year from $48.6 M USD to $47.1 M USD.
• However, operating losses surged from $1.9 M USD in 2010 to $9.5 M USD in 2011. That is an operating loss percentage of 20% - extremely bad.
• Driving the losses was a steep fall in gross margins dropping from 42.1% in 2010 to 38.6% in 2011. A 3.5 point decrease in a year is troubling especially considering management acknowledged this being driven by increased competitive pressures.
• Current assets dropped from $36.6 M USD in 2010 to $27.5 M USD. Cash and marketable securities almost decreased in half from ~$14 M USD to ~$7.6 M USD. These are bad indicators for company liquidity.
• The stock price is down about 28% this year from $4.60 per share to $3.30 per share. Market capitalization is ~$14 Million or about 0.3 times revenue. This is extremely weak even relative to the modest valuations in the surveillance market.

Vicon's Future

According to the report, "The Company believes that it has sufficient cash to meet its anticipated operating costs and capital expenditure requirements for at least the next twelve months."

We are not sure if Vicon has a medium to long term future. We cannot even find any positive forecast or pitch even in the report. We also do not see how they can position themselves competitively, especially with such growing losses and weakening cash position.