Arecont Vision's Growth Slows Significantly

Author: John Honovich, Published on Mar 25, 2012

One of the world's fastest growing surveillance companies, Arecont Vision's growth rate slowed significantly in 2011. Over the past few years, Arecont Vision's revenue skyrocketed from less than $10 million in 2007 to over $50 million in 2010. Last year, though, the company's revenue growth cooled. In this note, we examine Arecont's performance comparing it to Axis, Avigilon and Vivotek.

Background

Arecont reports growing 25.5% (from $51 million in 2010 to $64 million in 2011), noting that they 'sustained double digit growth for the 8th consecutive year'. However, for the previous few years, the company has been delivering near triple digit growth per year. While 2011 growth is solid for an average company, compared to its historical performance, this is disappointing.

Arecont notes that Europe was its weakest performing market region and that it already has taken steps to improve. At the end of 2011, they hired a new executive leading up Europe, formerly from Mobotix. Arecont is now expanding its team there. Moreover, Arecont noted that both the Americas and Asia outperformed their overall growth rate. Indeed, as we examined in our recent reviews of Axis and Mobotix, Europe was their weakest performing region for them as well.

Comparison

Arecont's 2011 growth is just about average for IP cameras. Most analysts agree that IP camera sales increased somewhere between 20 and 30% last year. While Arecont kept pace, this is a shift from previous years where Arecont was gobbling up market share and shooting up the ranks of top selling cameras.

Arecont and Axis's 2011 growth was about the same, though Axis's is more impressive. Since Axis is 8-10 times the size of Arecont, growing at ~25% is much more challenging for them. To put this in perspective, Axis grew their revenue more in 2011 than Arecont had in total revenue. While Arecont's historical growth rate made them a real challenger to Axis, Arecont's growth slowdown will make this much harder.

Avigilon's 2011 growth rate crushed Arecont's. Avigilon grew 86% last year and now nearly generates the same revenue as Arecont, despite having 33% lower revenue than Arecont in 2010. Avigilon is an especially interesting comparison because both companies lead with multi-megapixel offerings. Avigilon, though, differentiates itself with a high quality VMS offering and, in our surveys, much higher customer satisfaction.

As for other prominent companies, Vivotek's 2011 growth rate was far higher than Arecont's while Mobotix was about the same as Arecont. Companies that likely lagged Arecont including ACTi, IndigoVision and IQinVision.

Future

Right now, it is hard for us to tell if 2011 was a one year blip or a shift in overall trends. Given Arecont's aggressive new product roll-out in 2011 (including 10MP and 20MP cameras), slowing growth is surprising. Is the cause just Europe? Are the quality and reputation issues catching up with Arecont? Is the proliferation of so many competitive HD offerings constraining growth? We cannot tell but this year's (2012) results will be very interesting to see if they can rebound to their historical high standards.

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