Axis and Milestone on the Recession's Impact

Author: John Honovich, Published on Mar 01, 2009

As the largest manufacturers of IP cameras and open VMS software, Axis and Milestone are key forces in the video surveillance market. Recently, Axis and Milestone provided interviews to Security Products on the economy:

For those interested in hearing more about the recesison's impact on video surveillance, I encourage you to listen to those podcasts. In this report, I review and comment on the key claims made by Axis and Milestone.

Milestone Outlook on the Economy

Milestone's executives key points:
  • Q4 2008 growth was soft: slowed to 35%
  • January 2009 slowed further to 25%
  • Sales pipeline for Q1 2009 looks solid
  • Seeing slowdown in some new buildings
  • Municipal investments should increase due to stimulus

Milestone's growth has slowed significantly. In October 2008 at MIPS Copehagen, Milestone reported growth rates of 60%+. In a 6 month period, growth reduced about 40%.

This is another example of why I contend that convergence is slowing. Imagine analog and IP are two runners. Analog is far ahead of IP. The only way for IP to catch up is to run far faster for a long period time. What's happening now is that while both runners are slowing, IP is slowing far more significantly.

I would be very impressed if Milestone can hold 25% growth for the remainder of Q1 2009. The problem is not Milestone specific but a fundamental issue of the rapidly declining world economy that will hurt the industry for at least another year.

That being said, it is great that Milestone quantifies their performance. As a private company, they have no obligation to do so. However, their willingness to do so is a help to the entire industry.

Axis Outlook on the Economy

Axis' GM key points:
  • Video surveillance is not recession proof
  • Retail, banking, casinos are being hit hardest
  • Analog affected more than IP
  • IP is benefiting from lower Total Cost of Ownership
  • Expect to see consolidation with larger providers come out stronger

I am puzzled by Axis' contention that analog is more affected than IP. Considering Axis steep drop in growth (only 9% in Q4), their own results do not support that. Moreover, analog companies are not reporting drops anywhere near as steep as the IP video companies.

I find Axis' claim of lower TCO to be especially unbelievable. Last year, Axis claimed that systems of 40 cameras or more has a lower TCO (based on a study they paid for). In this interview, Axis does not even make that qualification. How did IP cameras TCO suddenly become so strong?

Consider that just last month, IMS Research released a survey of integrators where the overwhelmingly majority listed IP cost as the number #1 barrier. We have analyzed and discussed in depth as the number 1 issue for IP.

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