Who the heck voted NO?!
Barron's: If Trump Bans Hikvision
Published Feb 05, 2018 17:50 PM
What happens if Trump bans Hikvision from US government entities?
This is being considered in a new profile by financial magazine Barron's: China’s Hikvision Rises as Surveillance Gets Hot.
Barron emphasizes Hikvision's Chinese government ownership:
Hikvision, as it’s called, is controversial because it is a subsidiary of China Electronics Technology Group, which is directly controlled by the Chinese government, which raises concerns that Beijing could use its products to gather information. [emphasis added]
Then, citing an analyst, concludes:
If the Trump administration bans Hikvision from selling to government entities, it will be a drag on earnings, but won’t derail Hikvision [emphasis added]
In this note, we examine Barron's analysis, the potential impact financially and operationally both to Hikvision and its competitors.
Financial ****** ****** ***
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******** ***** ******* *** **% ** Hikvision ********, **** *** *.*. ********** for **** ***** **%; ***** ** the ********, ********** ** ******** ********, and ***** *.*. ******** ****** ** less **** *%.
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Operational ****** ** ** ****** ****
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Diversification ******* *** ********* ** **
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*******, ** ***** ************ ******** *** to ****, ** ***** *** *** major ******** ******, ********* ***** **** serious *******, ***** *** ******* ********* their ******** *** ******* *** ** domestic ********.
*** *********, *** ** ** *** next ******* ****** ******** *** *** of **** *** (********* *** **) where * ***** ************ ************ ***** theoretically *** *** * *******-****** ********, which ***** *********'* ******** **** *** ($4+ ******* *******) ***** ** ***** important *** ***************.
Justified ** ***
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Vote / ****
Comments (24)
Joseph Marotta
Feb 05, 2018RS
Robert Shih
Feb 05, 2018I don't even like Trump, but at the very least I hope his prejudice actually helps him do the right thing for once!
U
Undisclosed #4
Feb 05, 2018UD
Undisclosed Distributor #9
Feb 06, 2018People who distribute Hikvision and don't care about anything but the easy money, selling our nation's security for 5% above cost.
UI
Undisclosed Integrator #8
Feb 07, 2018U
Undisclosed #1
Feb 05, 2018Indeed, even more bullish for Hikvision's earnings, we believe diminished US sales might improve Hikvision's overall profitability...
In other words, they are operating at a loss currently in the U.S.?
JH
John Honovich
Feb 06, 2018they are operating at a loss currently in the U.S.?
We've had this discussion repeatedly, though you may be better finding the thread than me. If you can be so kind...
But to recap, Hikvision has hired an immense number of local people, they claim now 420. They spend more on marketing, events and promotions in the US more than anyone now (e.g., just last week). Their revenue, from any exec source we hear, is still way less than Axis in the US. And they do this despite much lower prices plus literally running continuous sales at ADI, etc. plus every month or so across the board ones. That's a pretty terrible combination for making a profit.
Is their profitability improving in 2018? They just hired one of the most expensive DC lobby firms to deal with their growing political crisis. And that certainly makes it harder for their salespeople to keep existing dealers, without even trying to win new ones.
So, yes, not only do I think are they operating at a loss in the US, the loss is going to deepen if the mainstream news coverage and political inquiries increase.
U
Undisclosed #1
Feb 06, 2018We've had this discussion repeatedly, though you may be better finding the thread than me.
I agree, I just wasn’t 100% positive that that’s what you were saying.
It seems like you are giving them a hint: “You could make more money if you got out of North America...”
JH
John Honovich
Feb 06, 2018I am sure they know that.
I would think the counters are a combination of:
- We'll work these issues out, continue to grow revenue and then one day be profitable.
- We can't cut back without losing face and causing things to fall apart.
- We know the situation is bleak but we won't admit it because this is a vanity play / HQ told us we have to, e.g., Hikvision Aims For #1 Brand In 2020.
U
Undisclosed #3
Feb 06, 2018Not sure if you are aware but many companies outside of the US can operate at a loss due to subsidies given by the government. China can do this easily as all companies are in a sense owned or partly owned by the Communist government so its just taking money from one pocket and placing it in the other.
And since they are flush with cash made off selling goods made basically by almost slave type labor they can operate at a loss until they gain control of a market.
JH
John Honovich
Feb 06, 2018they can operate at a loss until they gain control of a market.
As I have half-joked before, the Chinese government effectively acts as the world's largest and most powerful VC. To that end, I do believe the general tactic of operating at a loss to gain control of a market is a common tactic.
The question that I have is how much of a loss for how long are they willing to take?
One of the problems with Hikvision's US expansion is that the resulting branding issues cause problems in some other parts of the world and with their OEMs. At what point, are these negative externalities too great to accept?
Related, one factor is the state of the world economy. If the last few days stock market declines are quickly overcome, then no big deal but a global market contraction would put heavy pressure on aggressive market expansion tactics.
U
Undisclosed #3
Feb 06, 2018They can operate at a loss for a long time. They did 250 million in sales as well as China as a whole sucking up every dollar it sees. They have huge reserves of funds so they have no worries. Remember the Chinese are long term thinkers unlike the Americans. We think 1-5 years out they think 100 years out.
Also as the situation drags on they suck up more industries and more money which allows them to operate even longer.
JH
John Honovich
Feb 06, 2018We think 1-5 years out they think 100 years out.
People and countries like to think they are thinking 100 years out. Lots of things happen in the meantime.
They have huge reserves of funds so they have no worries.
If their financials are accurate. If Chinese debt does not continue to surge.
One thing the PRC is way better in doing than America is painting a pretty picture. In an authoritarian government, it is much easier to suppress negative opinions and bad news than in a democracy.
UM
Undisclosed Manufacturer #2
Feb 05, 2018"While the company is the choice for trunkslammer across the board sales"
Trunkslammer.. that was rough...
U
Undisclosed #3
Feb 05, 2018UM
Undisclosed Manufacturer #2
Feb 05, 2018
Ari Erenthal
Feb 05, 2018You're in for a treat, then. I hope you weren't planning on getting anything done today.
UM
Undisclosed Manufacturer #2
Feb 05, 2018
Campbell Chang
Feb 05, 2018It's mentioned at the bottom.
Huawei is banned from government installations. Here in Australia, Huawei were banned from tendering for a national fibre network and an undersea cable between the Solomon Islands and Australia was nixxed because the Solomon Islands picked Huawei for their end and ASIO said LOL NO!
There's a significant difference between running critical network infrastructure and Hik camera behind a secured NVR in terms of security and secret squirrel stuff but overall it's not an inconsistent policy nor is it unreasonable.
UM
Undisclosed Manufacturer #5
Feb 06, 2018HiSilicon, the manufacturer of most IP-Camera SoCs is fully owned by Huawei.
Which SoCs is Hikvision using?
:-)
Jon Dillabaugh
Feb 06, 2018It’s not a done deal until Fox and Friends runs the story. When they do, it will take about 15 mins for him to tweet about doing it, and then months later he will actually pull the trigger, which will end up being blocked by some fed court somewhere who has Hikvision cameras in use.
UD
Undisclosed Distributor #6
Feb 06, 2018I think you're last sentence should actually read "...end up being blocked by some fed court somewhere which has members that have been purchased by the chinese."
UI
Undisclosed Integrator #7
Feb 07, 2018It’s not a done deal until Fox and Friends runs the story.
There are other valid options. Competing manufacturers could make a pop-up book and send to the White House for use in daily briefings.
Jon Dillabaugh
Feb 07, 2018It's well known that Trump is much smarter than the crooked FBI, CIA, NSA, or any other acronyms you can throw at him. There is no need to read those fake news briefings. He's a very stable genius. His friends at F&F tell him so.