Axis Slow Growth Continues Q2 2013

Author: John Honovich, Published on Jul 09, 2013

If there was any doubt, Axis' most recent financial results should erase them. Axis is now in the midst of an extended, multi-year period of slow growth. While the company trumpeted top spots in various rankings, their financials paint a far more modest and troubling picture. In this note, we break down what is happening, what is working and where Axis is most struggling.

Quarterly Financial Key Metrics

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Comments (6)

Btw, on the Investor's call, the most frequent topic questioned was on emerging markets/Asia/China, showing the importance than investors are putting there.

It's going to be very interesting if they figure out a way to penetrate that market. They would almost need to completely rethink their strategy and either offer Asian market only cameras at much cheaper rates to possibly just re-boxing/rebranding cameras in those markets - similar to what GM/Ford have done in those markets. Buy out a large Indian or Vietnamese manufacturer and rebadge the products. Otherwise it could be quite the struggle there (as they have seen already).

Another option for them would be to partner / sell the boards chipset (which they do very well) as OEM and let a local put it into whatever housing is needed

It addresses the cultural issue of selling from / to Asian based MFRs as well as price since it would not be sold under the Axis brand

I doubt selling a board camera would be a good strategy. They're probably having their modules built in China anyway. Their only value add would be their encoder chip, their software, and the effort they put into image tuning in that software build. Unless that value add is perceived as huge, their margins will be very low. In my experience, the cheaper cameras win out without a lot of value added because they're "good enough" for many buyers.

It's pretty obvious that Axis cannot win in China but does it really matter?

With all due respect to Sean's recommendation for Axis to "Honeywell themselves" :), a premium positioned manufacturer is fundamentally unequipped to play a game based on low cost and political connections in a foreign country.

Even if Axis really tried hard, who realistically believes that China will continue to grow like it has unabated for the next 5 or 10 years. There's going to be correction, perhaps a very hard one. And once that happens, all the consternation about what to do to get into the Chinese market will dissipate.

More than one year Axis is desparately pushing every possible sales channel. They are losing / lost their exisiting long term partners/security solution suppliers, and trying the distribution business to be handled by wholesellers which are just box movers....

Very good products, and excellent product quality. But unfortunately, sales management can not catch up the same. Two major targets on their focus of growth are small systems, and emerging markets as it was stated in their Q2 interim report. It seems a little bit difficult to get big market share in those segments. Rivals, and low cost manufacturers are already there, and especially low cost products from certain manufacturers are working quite good while still competitive.

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