FYI: Commenter is from the financial community and is genuinely looking for guidance (i.e., not a competitor, etc.).
No, I don't believe the growth is sustainable.
One of the common trends that we have seen over at Avigilon is that they are churning through their sales staff on a pretty regular basis. The rumor was that they would hire someone long enough to get the deals going and go through their contact list and then fire them when a big pipe coming in. Then they would move on to the next guy and not pay him on the last guys pipe. They have burned a lot of bridges doing this, and there are people out there that hate their guts. All of the manufacturers of cameras and VMS are against them and are altering their pricing and prdouct to compete with them.
So I am guessing it is not sustainable, but I could be wrong.
"No, I don't believe the growth is sustainable."
I'll offer a counter-point. I think their growth is easily sustainable. They have a fraction of the total market share, and most end-users and integrators seem to be very satisified with their products. I also see the full-line model (cameras, VMS, access control) as an emerging trend, and I think they are doing it right (eg: some companies are overloaded with too many product options and semi-competing products that it gets confusing). The growth is basically theirs to lose.
I haven't heard about high turnover of sales people, if that is in fact their strategy, then I'd agree that a positive outcome is unlikely over the long term.
To determine if growth is sustainable, shouldn't you examine a little more closely the catalysts behind their rapid growth over a 2 year period?
- Did they roll out some new, unmatched by the competition, surveillance widget?
- Did they drastically increase their advertising?
- Did they hire a new, motivated sales team?
- How did their management structure/biz strategy change?
I think the most important quantity is why they grew so rapidly. What do you think caused it?
I'll go in the middle of the two of you. I think Avigilon's growth is sustainable. The question is - at what rate and for how long? Is it 50% growth each year for the next 3 years? Or is it down to 20% or 30% in a year or two? For an investor, that's the key issue.
As for market share percentages, a little context is needed. Everyone, even 'giant' companies, only have a fraction of market share. Let's say Avigilon is at 1% right now. What's Axis at? Under 10% Other mega companies in surveillance like Sony, Panasonic, Pelco are 5% or less? Does Avigilon become bigger in Pelco in the next 3 years (which their forecast essentially implies)?
Historically, there have been limits of any surveillance company's market share aggregation. Can Avigilon break that?
Appreciate the responses. I'll take a shot at answering the questions posed w/ the caveat that I'm very new to the industry.
Not to oversimplify, but from everything I've learned so far it looks some of the main drivers of Avigilon's growth include:
- A solid set of cameras buoyed by the marketing draw of having some very high MP cameras,
- A differentiated "end-to end solution" that no one else really offers, and
- A very tight integrator only distribution strategy that has driven loyalty and sales.
The combination of these strengths have clearly made Avigilon a force in the industry over a very short period of time. What I am most interested in though - is how sustainable are these advantages?
- Avigilon spends relatively little on R&D - so it's hard to see them being an innovation leader and marketing is easily replicated
- The previous poster already suggested that competitors are altering their products/pricing to better challenge Avigilon's set of solutions
- The integrator only distribution strategy as John H. has pointed out in previous points may be hard to scale
I can see how theit integrator only distrubution could be a problem. I tried to become an Avigilon Dealer after one of my biggest clients chose them as their new line for NVR and Cameras, but was told there were too many dealers in my area.
My area is not huge, but if this is happening all over the place, would it not limit some sales potential? I do kind of understand why they limit the number of dealers, but it's got to have some sort of affect down the road, I would think.
I don't believe it is sustainable. They made their mark with very good software and no licensing agreements. They stuck to what they did best and the results were enviable. Once they moved to H.264 the explosion was quick, and it all went back to good service, easy install and simple GUI. But what have they really released in the past two years that keeps them out front? Basically all their new products are just "me-toos", and that's not going to keep them on the top of the technology curve.
But the single thing that I believe will bring them down is the way they do treat their customers, VARs and their former reps. They are single-minded in their growth strategies and don't do the things that are required for long-term relationships. I think you'll be hard-pressed to find a former employee, former VAR or former rep firm that will speak highly of Avigilon's upper management. You can't just use people as throw-aways and then expect any loyalty. I'm afraid once others catch up with their software, they could beging a quick fall.