Axis and Milestone To Remain Independent, Canon Declares

Hoping, fearing, anticipating a 'Super Avigilon'?

Will Axis and Milestone merge to become an 'end to end' solution?

No, declares Canon.

Inside this note, we share and examine Canon's declaration to IPVM about the future of the two mega video surveillance companies.

IPVM asked Canon whether the plan was to run Axis and Milestone as 2 independent companies within Canon or will the companies, sales teams or product offerings be integrated?

Canon unequivocally declared to IPVM:

"The plan is for both companies to remain independent entities within the Canon Group with their current management structures in place. Essentially, both will continue conducting business as they always have."

The only thing more astounding than Axis and Milestone merging is them being bought by the same company and staying independent. But Canon is not mincing words here.

What's the Benefit of Remaining Independent?

Though there's clearly benefits of the two being independent companies, there is certainly much less so when both are now subsidiaries of the same conglomerate.

Trust Issues Anyway

Trust is eroded even if they remain 'independent' as many existing camera and VMS partners will be concerned about the potential for Axis and Milestone to collaborate and undermine the partner.

For instance, why should a sales person at Sony or Genetec bring in Milestone or Axis respectively at this point? And if they have any sway in the deal, does it really make sense to recommend Milestone or Axis? What upside does that bring versus recommending a manufacturer who is no threat? Worse, Axis and Milestone were strong partners in the past and anytime they work together on a project in the future, it will inevitably be tinged with concerns or rumors that they cross-sold the deal or that they actively worked to beat out independent rivals like Sony or Genetec.

Forego Cross Selling

If they stay independent or even mostly independent, then they give up the big benefit of cross-selling, where they can offer discounts for buying combinations and increase the number of deals where both are purchased. Tyco's transformation of Exacq and the success of Avigilon show the upsides of this.

Avoid Painful Merging

The biggest plus is that actually merging the two companies would be extremely painful and contentious. On the internal side, it would likely entail layoffs / cuts and fundamental changes in how they do business. And on the external side, it would undermine more than a decade of partnerships and relationships. Many employees and partners would see this as an act of betrayal after years of touting openness. The cost both financial and emotional would be significant and the risk that the 'merger' failed is non-trivial.

Why Buy The Two?

Ultimately, we are at a lost at why Canon paid such a premium for Axis and Milestone, only to run them as independent companies.

How will Canon run Axis and Milestone better than they did themselves if the strategy does not change at all? How will Canon deal with the declining growth of IP video and the closing out of the IP video frontier? How will Canon deal with the rise of the Chinese manufacturers?

Does Canon really think that its lens, imaging or manufacturing is going to radically change Axis' fortunes and overcome all of these issues?

It seems inevitable to us that, in the next few years Canon will realize that the status quo with minor Canon-ization will be insufficient to meet the financial returns they expect from this deal. Will they simply accept it? Will they reduce funding then? Will they then pursue the solution approach?

Since Canon has been explicit, we believe them that they will aim to keep Axis and Milestone independent but we are confident that their results will be disappointing.