Axis Bad Financial Results Again (Q4 2014)By John Honovich, Published Jan 30, 2015, 12:00am EST
Bad results last quarter spurred a debate about Axis performance.
Now, Axis has turned in equally bad Q4 2014 results.
In this note, we look at:
- America's weakness and inventory drop
- Asia's weakness
- Avigilon and analytics
- AVHS progress
- Competing with VMS partners
- Failing with smaller systems and emerging markets
- Outlook - the new normal
Axis continues to call for long term 16% - 22% growth.
However, Q4 growth was just 7% in local currencies, the second quarter in a row with such numbers. For the year, Axis had quarters of 15%, 20%, 7% and 7% growth.
Americas Weak and Inventory Drop
Year over year, Americas only grew 7% in local currencies. Quarter over quarter, revenue actually declined.
Axis cited a significant drop in inventory levels for its distributors as a key driver of the weak growth. We believe a major driver of this is Axis declining competitiveness and the corresponding spike in Hikvision dealer wins / sales in 2014. The price of rival offering has dropped sharply and Axis has simply ignored it.
Asia was extremely weak, at just 5% growth in local currencies. This is even weaker than the previous quarter when Axis, year over year, grew 11% in Asia. Axis commented that "the southern part of Asia was much lower than what we expected."
At the same time, their largest competitor, Chinese manufacturer Hikvision, finished 2014 up 60% overall to ~$2.8 billion USD revenue.
Avigilon and Analytics
Axis acknowledged the Avigilon / OV deal on the call, noting that:
- "In general analytics has not had a big impact on the market yet"
- "For our offerings in the market we are convinced that we have the right protection"
- "We don’t know the strategy of our competitors when it comes to that acquisition."
Axis cloud offering, AVHS [link no longer available], was mentioned as one of their 'strongest trends', though Axis admitted that it was ‘from quite low revenue levels’, despite being offered for approaching a decade now.
Competing with VMS Partners
Axis is increasingly competing with their VMS partners. When addressing that and their new S10 NVR appliances, Axis wrongly declared, "our VMS partners don’t typically sell their own hardware." Indeed, their largest partner, Milestone, just introduced their own a year before Axis did. Genetec sells hardware. Exacq sells hardware, etc.
Axis emphasized that they had told their VMS partners this was coming, emphasizing a "transparent and open dialog", and that partners were "well informed for many years back", before acknowledging that "maybe not everyone loves it."
Failing With Smaller Systems and Emerging Markets
The biggest problem for Axis is that they know and admit that growth is being driven by smaller systems and emerging markets yet have not delivered the product portfolio and pricing to deliver that.
The S10 NVR appliances, their biggest low end release in 2014, is incredibly expensive. Even if it is 'great', the price point is 2x to 3x what their key competitors are offering for small / SMB systems.
Equally importantly, Axis is stagnant on low end camera releases, while Hikvision and Dahua have made the $100 HD IR dome commonplace (at half Axis price or more). Axis continues to do well with premium, niche offerings, like the suicide resistant camera but such offerings do not address the core growth part of the market.
Outlook - The New Normal
This quarter is further evidence that Axis is ignoring the small systems / low end market and that the financial results will continue to reflect that strategic deficiency.
The heady days, just a few years ago, of 20-30% growth are now a thing of the past, partially due to the maturation of the market but also because of Axis product / positioning decisions.
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