Milestone CEO: "There Will Be No Change In Our Business Model"

Canon's acquisition of Milestone is now complete. Milestone's CEO sent out a letter, copied below:

On June 12th we finalized an agreement for Milestone Systems to be acquired by Canon Europe, in which it was defined that we will be an independent, standalone company within the Canon Group. This deal closed and became a legal reality on July 7th.

This is a major next step for both companies, and it makes me very proud that Canon - a respected global technology leader - has chosen to acquire Milestone. I am extremely excited about this move and believe that being part of a larger group will be advantageous for our partners and customers.

Milestone will continue as an independent company within the Canon Group, operating as we do today. There will be no change in our business model, and the Milestone management will continue under the new structure. We are taking this step to accelerate the growth of our entire VMS ecosystem of partners and customers. Our open platform strategy is firmly supported by Canon for the success that it brings all of us.

Canon's business motivation for this acquisition is growth. With Milestone they will establish a significant footprint in the Network Video Surveillance (NVS) market, and together we will be a much stronger partner to work with. Canon sees the need for advanced software capabilities and a strong partner network to accelerate the expansion of NVS business.

As a key element in our success, maintaining our partners' relationships for the long run is a priority for both Canon and Milestone. Canon is committed to Milestone continuing to provide open platform solutions to the market, and appropriate measures will be taken to safeguard the integrity of all our partner relationships.

Canon has a successful history of managing acquisitions this way; for example, they have proven this with their acquisitions of Onyx and I.R.I.S. We see this as a good way to grow our business together. As a standalone company within the Canon Group, we will continue the development of new products.

Canon understands that the open platform is the key to Milestone's success - and to our partners and customers who are realizing its advantages - so they support our open culture and business model. Customers and partners will continue to enjoy the freedom of choice in hardware and other systems to integrate with Milestone VMS.

Canon's network camera business has relationships with other VMS providers, just as we do with other camera manufacturers. These will continue in parallel. We have a long-standing relationship with Canon as one of our camera partners, and Milestone's support of the other 100+ camera manufacturers we work with will stay in force, as well. Canon confirms that they will respect the confidentiality of our partner relationships as a cornerstone in our continued success.

As part of the Canon Group, Milestone will accelerate the growth of the VMS business through maximizing expansions into new market sectors and geographies, and by harnessing both companies' heritage in R&D and innovation. Did you know that Canon is Number 3 in the world for patent registrations? In the last year alone: more than 3,800! The global resources of the Canon Group can only open up broader opportunities to explore, and Milestone is always looking at new options to improve video surveillance and its many applications, convergence with business systems and processes, and new technologies that can be applied.

Finally, I would like to thank all of our partners for our collaborations over the years and the commitment to Milestone that has made this new stage in our journey possible. We have built this company together by combining our excellent products with your outstanding support towards customers; we have created an exceptional symbiosis in the industry. Canon choosing Milestone is an endorsement of our partner ecosystem achieving such success together.

Canon is a highly respected, multi-national corporation with a well-known brand name that stems from a tradition for quality and excellence. Check out The Canon Story here to learn more about the organization. They have exciting strategies for progress in the future, which we look forward to sharing with you. Our open platform vision continues!

Sincerely,
Lars Thinggaard
President & CEO, Milestone Systems

The most interesting quote is "There will be no change in our business model."

When Milestone started selling its own appliances after years of touting 'hardware agnosticism' was that a change in business model?

Likewise, I cannot imagine that "Canonstone" will not add any promotions, packaging or cross-selling of Canon cameras with Milestone VMS. And when that happens, would that not be a change in business model?


Why aquire, or be aquired, if it does not offer an advantage?

Milestone's business model has long been to sell as many licenses as possible. To that end, they will continue to do various things that increase the number of licenses sold. Nothing changes under Canon in terms of their business model, however they may now have alternate methods and resources available to increase the number of licenses they sell.

Quite simple, really.

"Milestone's business model has long been to sell as many licenses as possible."

That's a fairly reductionistic view of business models. What's my business model? To make money???

For instance, let's say IPVM started to give away Genetec VMS licenses or re-labelled Dahua cameras to subscribers. That might very well help us 'sell as many subscriptions as possible' but it's hard to justify that our 'business model' would not change because of it.

Milestone's business model, as they continue to assert, is grounded on the 'open platform' and if they implement "alternate methods and resources" that conflicts with the 'open platform', that is a change in business model.

It was meant to be reductionistic. A business can change their execution plan dramatically yet still stick to their "business model".

Same thing with being "open". Is Milestone no longer open if they support all the porducts they do today, but licenses for Canon cameras are 1/2 off, or free? Are they no longer open if they do everything they do today, but enhance certain features around Canon cameras?

What does "open" truly mean anyway?

Milestone has long been accused of being highly preferential to Axis, while also being "open". Now maybe they'll just be preferential to Canon.

This statement is just posturing anyway, they don't know what the future holds. If being closed suddenly becomes immensely more profitable than being open do you think they will continue to be an open platform system just because of this statement or some corporate philosophy?

"Is Milestone no longer open if they support all the products they do today, but licenses for Canon cameras are 1/2 off, or free? Are they no longer open if they do everything they do today, but enhance certain features around Canon cameras?"

In the same way that Milestone has historically been consider more open than Avigilon, if Milestone takes such steps, they would clearly, by a large portion of the market be considered far less open.

I am not saying it's a bad thing. I actually believe Milestone / Canon will make more overall revenue / profits by emulating more of Avigilon / Tyco, etc. but it will come at the expense of the 'open platform' philosophy.

Does the "open platform" mean only one product/service? Is the industry not going the way of more than one product/service? Are VMS companies not getting into card access? Are card access companies getting into VMS? Are camera companies getting into VMS?

Get ready for major security companies to do everything like in the days of old. Hopefully this time they will be "open platform" and not closed.

I think my favorite thing about that email was the subject line: "Canon acquires Milestone Systems to Expand the Open Platform"

That required a couple of takes.

Canon is a superduper company, i swear.... "Canon is a highly respected, multi-national corporation with a well-known brand name that stems from a tradition for quality and excellence." He is over selling the situation which makes me even more suspect. Canon reached out to us asking for a demo download of our VMS for their evaluation. How can we trust their intentions moving forward?

I see this point as critical too.

It takes 'two to tango'. Milestone standing on the dance floor swearing that Canon just drove the party limo is one thing... convincing all the camera manufacturers Milestone really only just wants to dance is another thing.

If Milestone is honest, the hard part is convincing the others, right?

"If you like our business model, you'll be able to keep our business model. If I had a VMS, he'd look like Milestone"

Wow, you guys are beating this to death and there are no known facts just guesses. Cannon bought Milestone, so what? No one knows what's going to happen, probably not even Cannon/Milestone.

Let's all just see what happens before we get out the pitch forks and torches....Just saying.

BTW-Hope you all had a great 4th (for the US members).

The fact that Milestone's CEO wrote a long letter, swearing over and over again that they are going to stay 'open platform' is meaningful and why the letter was shared.

Other people are allowed to comment on it.

John...

My point was there seems to a lot of rampant negative criticism of Milestone's purchase not based in fact... just speculation. I back that up with, in February there was an IPVM article about Milestone heading to an IPO; which we now know didn't prove out--and I was looking forward to buying their stock.

I love IPVM for the factual reviews and installer/dealer real life experiences. I just don't understand the criticism of Milestone for something that has not happen, may happen, or may never happen. Obviously if you sell their product and are concerned about open VMS go to someone else. I just don't think they deserve 3 blistering articles based on speculation.

BTW- I don't work for Milestone, I simply like and install their VMS.

EJ, Milestone was working toward an IPO, had hired a banker and this was confirmed by numerous sources both inside and outside Milestone. There was even quotes from Milestone's CEO in the local Danish business newspaper about this.

At the end of that process, they decided to be acquired instead.

Here's another fact for you. Milestone's CEO told the local Danish business newspaper a month before being acquired by Canon that:

"To the question of whether there can be a large international giant and buy Milestone before a possible listing, he said: "Yes, but it would be a boring game. Then we would sit with a resident of the table as chief. Nor would we have the same passion and mission."

We've researched this heavily and the reality is that Milestone continues to say one thing and do another. That's a fact.

They have a track record of making strong claims and flipping on them, just like above. It's certainly their prerogative, but it provides credence to the reality that they will do the same on the 'independent member'/'chinese wall'/'open platform' claims.

John,

I wasn't implying you got the story wrong, my point remains that nothing is final till process is complete. Milestone wanted to go IPO and went with a buy out. OK fine.

You're saying Milestone has a track record, what are the other things Milestone has said and then done something else?

Frankly, I'm all for Milestone offering Cannon cameras if they're any good and can compete with other quality brands. I'm just not familiar with Cannon's cameras, maybe that's the whole point of the purchase.

"I'm just not familiar with Cannon's cameras"

We have a full test of Canon's newest IP cameras here.

Pitch forks = Bad but Torches = Good

The long letter swearing "no change" is a classic M&A tactic to attempt to quiet current customers and reduce the number of variables in the equation that the CEO is working. Of course, there is a longer-term plan to make changes that will increase the value of the acquisition ... 'buy low & sell high' is also a fundamental move - Canon's investment needs a positive return.

We just don't know what Canon's plan is, so the speculating begins.

My guess is that Canon will 1) maintain the 'open platform' approach to continue Milestone's growth curve as much as possible while 2) offering some sort of bundled license deal to increase awareness, consideration, trial, preference and purchase of their cameras. We are aware that the Canon brand is well-known although Canon security cameras are under-performing in market share. (Walking away from the 'open' approach - or not loudly proclaiming allegiance to it - would be like jumping from an airplane while still untangling your parachute ... there's no room there for a Plan B.)

Threats to this strategy include 1) decreased transparency & cooperation between the camera makers and Canon/Milestone R&D (especially hurtful would be weakening the close ties between Axis & Milestone), and 2) that prospective customers will consider platforms other than Milestone where they might not have done so prior to the acquisition.

The CEO's challenges include 1) growing the opportunities faster than the threats, 2) finding or inventing other avenues to capitalize on the strengths of the combined companies, and 3) managing both the security and financial markets' perception of the future value of the Canon after this investment.

Michael, good thoughts.

One other challenge this letter increases is towards Milestone's brand / trustworthiness in the industry.

By exclaiming so loudly and so frequently that they will be independent and that there won't be any changes, when changes do come (e.g., to cross sell Canon / give discounts / packages / sales incentives) it's going to cause them to lose good will.

I recognize the short term gain of doing this but it increases long term risks.

do you think michael that canon will 'lean in' to milestones growth curve and with their backing actually let them get there quicker than they might have on their own?

That's an interesting thought, and one I don't think has been offered. Canon can certainly afford to 'lean in', or 'pile on' perhaps, and could spend madly behind the Milestone name and product like no one has before. It could, with bundled Canon/MS offerings, create some preference and really disrupt the marketplace. It could even straight-out buy share by giving away cameras and/or licenses to win competitive opportunities.

But, in my opinion, Canon has never shown much creative thinking in the marketing of their photography, printer or copier businesses. I wouldn't hold my breath in anticipation of a Nike-esque breakout.

Also, Milestone was the VMS 'leader' in spending on sales and marketing. That was their bread and butter, so it's not as if Milestone is a hidden gem that just needs some money and marketing attention to have sales skyrocket.

If you need to go a Mile with a Stone fast, a Canon is the obvious choice.

Watch out, Madison Avenue! RW is on the loose again ...

I really don't know why we have so many discussions based in assumptions on this case. This company was acquired by a camera manufactor, this is the fact.It is better to them to be alligned to the new corporate strategy than still trying to show an independent and open positioning if the fact shows the oposit, they already choosed their way.