Axis Q2 2014 Growth Up ButBy: John Honovich, Published on Jul 09, 2014
Axis' seesaw growth continues. After Axis missed and profits sank in Q1 2014, the second quarter's overall growth numbers improved (20% growth in local currencies). However, the geographical breakout shows this to be an anomaly and downward revised market growth rates indicate future challenges.
Americas Still Weak
Americas growth dropped from an already weak 16% in Q1 to just 13% in the 2nd quarter.
This is a problem for Axis as the Americas account for the majority of their business. It also points to them continuing to lose share in the Americas to the likes of Avigilon, Hikvision, Samsung, etc.
EMEA Huge Jump
By contrast, EMEA revenue in the 2nd quarter was up 28% year over year. While this is huge, Axis acknowledges it is off a weak 2013 base and is almost certainly unsustainable at that level. Overall, EMEA's macroeconomic challenges / conditions remain.
Downward Market Growth Rates
For the past few years, Axis cited "the long-term growth rate for the network video market" at 20 to 25 percent.
Now, Axis has revised that downward, saying that the latest reports put the growth rate at 16 to 22 percent.
This, of course, is just for network video, not all video surveillance but follows the same downward pattern we have seen for the overall market. A lower growth market makes it tougher for all participants.
Below Average China Growth
In the call (17:30), Axis acknowledged that their growth rate are below the Chinese average and specifically the mega domestic manufacturers, Dahua and Hikvision.
Axis mentioned that market research reports saying average sales price decline of 5-10% per year. They did not disagree with that. As such, Axis is increasing total unit sales faster than total revenue.
Axis Responds to Milestone Deal
Axis CEO emphasized their 'strong belief' that enterprise customers want best of breed and prefer to pick the 'best individual components' rather than buy a solution. However, he acknowledged that for small systems, end to end solutions are attractive and noted that this was what they were doing with Camera Companion, AVHS, etc.
New Products All High End
However, Axis selection of new product releases compounds their challenges in a decelerating market.
Though this should further solidify their hold at the top of the end market, the rapid progress of their Chinese competitors both in super low cost IP and now non-IP HD cameras, combined with Axis stagnancy in releasing new budget / low end offerings, means that they are going to continue to suffer declines in the small camera count / mass market business that they previously professed was a key growth area for them.
Axis Q2 Financial Documents