Axis and Milestone To Remain Independent, Canon Declares

"with their current management structures in place"

What? Again? Tell it to the Pelco management team.

Like for any acquisition Canon is not going to tell us their real strategy and this for obvious reasons. As I said in another discussion, if they don't change anything then they need 5 to 6 years at the current business level to reimburse themselves and before starting making benefits. That is clearly out of question.

Keeping solutions open is a must-have (at least short to mid term), optimizing to the extreme the integration of both should be a given. What else? Pull-through on the hardware side may be ? thousands of sensors can be interesting and profitable. And owning the full chain is clearly an advantage when you want to support big systems. They are just missing network switches in fact.

Another point is that Canon has a (very?) good service solution in place for their printers so selling sefvices is another possible target for them. When you have good products a service business can be very profitable.

And ultimately keeping everybody in place is just a communication fact, no way it can be the reality. Finance people are going to make sure there are not 2 guys doing the same job in the same region for sure.

Ok, so they say they are not merging Axis and Milestone.

But does that mean they are keeping Axis seperate from Canon Security?

Now that's crazy!

My guess, at least what makes sense to me, is that Axis and Milestone will be run a seperate business units to "bide time" or (attempt to) not lose current market share, while behind the scenes a lot of R&D and tech work is done to create a "solution" approach that closely and effectively matches Axis' and Milestone's lines.

As a "solution," Axis and Milestone don't really have a UVP. Axis doesn't really do anything terribly unique, and neither does Milestone, though they both have size and quality. Avigilon, the "solution" company that the new Canon subsidiaries are being compared to, on the other hand, has a (somewhat) unique value proposition with their super-high MP cameras. For now, there are too many alternatives to Axis and Milestone that will remain open-platform... pushing Axis and Milestone to be mutually exclusive at this point can only cost them revenue and sales; even if it does create operational efficiencies.

If Canon is smart, they're going to build a solution using Axis camera and Milestone software that gives them some unique advantage (or many unique advantages), whether it's efficiencies in matching the software to the camera exactly, reducing storage requirements somehow, video analytics, or some other sorts of bells and whistles. Then, in a year or two once they're done creating this new line, they'll pop up at ISC West or some likewise large trade show with the new "Super Avigilon" type "solution," probably with their own NVRs (perhaps with integrated POE switches), and either treat the solution company as a third, seperate division or roll Axis and Milestone together into the new behemoth. They've already spent billions on acquiring these two companies... they clearly have the money to wait and be patient, combinbing the two only after creating a "disruptive" product.

Of course, that assumes that Canon is willing/able to become an innovating force in this market...

I'm just trying to find in the current mess what can bring value and interest to these acquisitions. I'm not sure to what you are used to in term of business but this is not every morning that I do see someone putting 3B$ on the table.

John, I made a mistake in my calculation but we can both agree that it would take many years to get a valuable ROI without changing anything.

I also agree with G that most probably they are going to work on something behind the scene to release in 1 to 2 years. But what are they going to do even with a super Avigilon? is it sufficient to justify 3B$ + 2 years development? I personnally doubt it can be the case. So I believe that they have in mind the fact that this new solution is going to drive something else. Hardware pull-thru, services, I don't know, but something else. It is not self sufficient. Just my 2 cents

Is this not what every company says when they purchase a new company? I worked at a company that purchased a competitor, decided they liked the competitor's business model better, and 6 months after making the "no changes" statement they flushed all of the executive management to replace with the management of the company they just purchased. It's all lip service while they figure things out.

There is zero chance they stay the course. They just paid a ton for both of these companies. To get their return they have to cut operational expenses (to increase margins), adjust the marketing/sales strategy (to increase revenue), create a new market niche, or all of the above.

First of all I'd like to point out that we (Veracity) partner with many leading companies, including both Milestone and Axis. However, my view expressed here is a personal one and not based on any discussions with any Axis or Milestone people.

I think the key point is that Canon is a Japanese company. They have a completely different perspective on time scales and return on investment than do US and (most) European companies. They plan strategies for the long haul and invest in long-term research and development. Just take a look at the Canon corporate website and see how they have transformed the company, since it was heavily in debt in the mid-90's, with a decades-spanning phased strategic plan.

The security market is clearly a market that Canon sees as a good long-term bet, so they have acquired two of the leading players and may indeed have their eyes on others too. Just because Tyco/Exacq and Schneider/Pelco have done things differently doesn't have any bearing whatsoever on what Canon will do with Axis and Milestone. Whatever their plan, it will be years in execution.

I dont think what we are looking at here is the creation of a mega surveillance provider. I think its more of a diversifcation of Canon's business line. A protection of their long term revenues as the camera in your hand business naturally slows down. Personally i think its a good thing, Canon is a stable company and sometimes you need to mix things up a bit to make change. I can't see them joining the companies, they dont need to.

I fully agree with Alastair and this is definitely the japanese dimension that makes me thinking there is a link with their sensor business. New patents came in 2014, they showed recently a 120Mpxl sensor and in parallel their camera (in the sense of private camera to do photo) business is declining. There are even rumors of the Canon camera divison using Sony sensors instead of Canon. Is the video surveillance market a solution to partially save the sensor production? Maybe

That's like Nike buying a rubber tree plantation and a sweat shop facility and saying they're going to remain independent.

Good info and all one can think from Canon's statement - did Canon buy both Axis and Milestone just to keep someone else from buying them, is that really just the motive. Only time will tell...

Folks, having worked at the top of a Japanese company as well as experienced their behavior within a merger, I can assure you that over a short time the two entities will be consolidated. Finance rules in Japan and they will inevitably seek the purge of redundant management followed by consolidation of office space, combination of sales teams, and overall headcount reduction. Sales per head is a key metric.

Please recall the Schneider takeover of Pelco where similar claims were made. The trust issues will emerge in the market and some good local management ( expecially at the top ) will be replaced with Japanese ex-pats.

Can anyone explain this anti-American paragraph in the Canon press release?

...any purported tender of shares made by a person located in the United States or any agent fiduciary or other intermediary acting on a non-discretionary basis for a principal giving instructions from within the United States will be invalid and will not be accepted. Each holder of shares participating in the Offer will represent that it is not a U.S. person, is not located in the United States and is not participating in such Offer from the United States or that it is acting on a non-discretionary basis for a principal that is not a U.S. person, that is located outside the United States and that is not giving an order to participate in such offer from the United States.

This seems overkill even for legalese. Wonder what issue they are trying to avoid by not purchasing any stock from U.S. people? Someone should buy a share of AXIS and refuse to sell until the tender, just to see what happens...

Couldn't Canon just come out with a product/brand that combines Milestone and Axis under one umbrella while maintaining those brands separately as well? That way they still maintain "independence" of the Axis and Milestone brands, but can start to bundle their product?

I'm not sure Lars is on board 100% with the Axis acquisition:

People have asked me about Canon’s offer to buy Axis. This is something, of course, that is possible but it is an offer, not a purchase yet,” he told attendees. “I want to keep the focus here at MIPS on you our partners and not on Canon and Axis. They are great partners of ours, but I do not want to add to speculation and I want to close that discussion as of now.” MIPS conference

Although it mostly can be explained away as a cheerleading move, it is unusual to see a CEO of a subsidiary subtly emphasizing the fact that it is not a 'done deal'. Maybe Lars is looking to get some face time with the 58th most powerful person in the world*, Fujio Mitarai.

*2009