Canon Acquires Axis Communications

By John Honovich, Published Feb 10, 2015, 12:00am EST

This is the biggest deal in video surveillance ever.

Just 8 months after buying Milestone, Canon is set to buy Axis.

IPVM ImageCanon has offered $2.8 billion USD for Axis, a ~50% premium over Axis stock price. Axis' 3 main shareholders, holding 39.5% of the shares, and Axis' board are unanimously supporting the deal so it appears that this will close shortly.

For background information, here is Axis' official statement [link no longer available], Canon official release [link no longer available] and a Swedish business news article.

Axis Struggling

Axis has hit a wall over the past few years, with decelerating growth and no clear plan to deal with (1) the rise of low-cost Chinese vendors and (2) the strengthening of 'end-to-end' offerings like Avigilon. Axis, historically a camera manufacturer, clumsily attempted to strengthen its own VMS while continuing to release a variety of high-end but niche cameras.

Rich Valuation

Despite Axis struggles, Canon is paying a premium for Axis.

Canon is offering over 4x revenue and 45x profits, which is a lot for a company who is trending down into single-digit growth rates.

Indeed, though Axis continued to claim growth would (eventually) be in the 16% - 22% range, we find this hard to believe. And now, with the disruption of this offer and likely subsequent integration into Canon, at least in the short term, Axis will be further hindered.

Join IPVM Newsletter?

IPVM is the #1 authority in video surveillance news, in-depth tests, and training courses. Get emails, once a day, Monday to Friday.

Canon Nowhere in IP Cameras

Canon has never been a significant player in IP cameras, on any measure. Though they have had an IP camera line for years, it has always been comparatively limited, with a narrow range and no clear differentiators. See our recent test of Canon IP Cameras.

Needless to say, given Axis extremely broad camera offering, this makes Canon a serious factor in the surveillance industry now.

Canon, Milestone and Axis

Clearly, the biggest potential impact is Canon owning both Milestone, one of the biggest VMS providers, and Axis, one of the biggest IP camera developers.

In 2014, when Canon acquired Milestone, the biggest concern was whether Canon was going to package its IP cameras with Milestone's VMS software. Historically, Milestone aspired to be camera manufacturer agnostic. Indeed, Milestone went through extreme pains to assure everyone that Canon would have no influence on them and that there would be a Chinese wall between the two.

Now, it appears Axis and Milestone will be reunited, more strongly than ever. In the late 1990s and early 2000s, Axis and Milestone, just ~50 miles apart, though separate companies, helped each other develop into the significant forces that they are today.

The Canon Axis / Milestone Solution

We fully expect Canon will offer end-to-end solutions of Axis and Milestone, with cross-selling and discounts for buying the package. If Canon does not do this, quite simply, they are fools.

Axis already knew that having a stronger VMS was key to increasing its sales and, clearly, Milestone is a huge upgrade from what they previously offered.

Moreover, as shown by Panasonic's acquisition of a VMS last week, selling a 'solution' is critical to competing with low-cost Chinese cameras. Chinese manufacturers are weakest on the VMS / software side, so packaging a high-end VMS is a key tactic to differentiating against cameras that are far lower cost.

Consolidation and Industry Downturn

For years, pundits have proclaimed consolidation was going to happen. This year, they are right. See the major surveillance industry moves over the past 15 months.

The end of the IP camera growth era is a big reason for this. The easy growth of transitioning from SD analog to IP is now at the tail end and the new trend of analog HD, with its super low costs, is bad for almost all major brands.

Beyond that, no manufacturer has been able to identify a major new growth area, save for Avigilon, who is making a serious run at analytics, having bought VideoIQ and spent nearly $100 million on patents (e.g., 1 and 2).

Can Canon Execute?

Canon has a big job ahead of it, digesting Axis and figuring out what to do with both Axis and Milestone. Both companies long championed the mission of the open platform and working with partners. The transition to subsidiary of a Japanese conglomerate is going to be challenging.

Who Wins / Who Loses?

At some level, Axis (their investors at least) win here. Approving the deal shows the company lacked confidence in its own future. They were already public, they did not need the liquidity nor the cash.

Certainly in the short term, Axis the company, its employees and partners lose here, as they have to deal with the end of being an independent industry leader.

Correspondingly, Axis' key rivals like Hikvision and Avigilon, stand to gain from the inevitable slowdown, confusion and concern that these acquisitions entail.

Longer term, it will depend on what Canon does, but we sadly suspect that Axis and Milestone's days innovating are mostly behind them, even if Canon can generate more profits from the two.

And poor Genetec, now the last major independent surveillance manufacturer. One has to think they are the #1 target for consolidation next, which might make them rich Genetec, in short order. [Update: Genetec has released a statement on the deal.]

What Do You Think?

26 reports cite this report:

40+ Alternatives to Dahua & Hikvision For Video Surveillance Camera Manufacturing on Aug 17, 2021
As bans against Dahua and Hikvision rise (from Taiwan's ban to the US NDAA...
Axis Executive Bonus Plan Examined on Feb 23, 2021
Axis executives have a bonus plan that pays them a maximum of 388% of their...
Axis Releases Unified VMS / ACS - Secure Entry on Feb 18, 2021
Axis is moving into the 'unified VMS and access' market, but they tell us the...
Canon "Deepening Cooperation" Between Axis, Briefcam, and Milestone on Jan 25, 2021
Canon has declared that it is "deepening cooperation" between the 3 video...
Axis Is Losing Ground on Nov 16, 2020
Axis is losing ground, as the market shifts to analytics and cloud, and the...
Acquisitions - Winners and Losers on Dec 10, 2019
Most major manufacturers have been acquired over the last decade. But which...
Fujifilm Expanding Into Video Surveillance on Jul 26, 2019
While Sony continues to fade out of the video surveillance market and Canon...
Axis Favorability Results 2019 on Feb 26, 2019
Despite more product shortages, but strengthened by increasing cybersecurity...
Canon Responds To IP Camera Hacks on May 30, 2018
Canon cameras made international news earlier this month, with reports of...
Canon Acquires Briefcam, Now Owns Briefcam, Milestone and Axis on May 09, 2018
Canon already owns two of the biggest names in video surveillance, Axis...
Avigilon Acquired By Motorola Solutions on Feb 01, 2018
Avigilon has finally been acquired. The acquirer is Motorola Solutions, a...
Bubble: Dahua Doubles Market Capitalization on Nov 07, 2017
Dahua's stock is in a bubble. Those of you in the industry know how bad of a...
Hikvision Stock Surges - Doubling In Past Year on Jun 29, 2017
Hikvision's stock, on the China Shenzhen stock exchange, has more than...
Axis / Canon Conflict on May 18, 2016
Canon spent $2.8B to acquire Axis, and in doing so created one of the...
Axis Acquires Video Analytics Firm Citilog on Feb 01, 2016
Axis rarely makes acquisitions. They get acquired, of course, (i.e., by Canon...
Milestone CEO Fights Against CCTV 2.0 on Jan 15, 2016
Is Milestone simply a pawn of Canon, destined to be merged with Axis to be...
Axis: Take Down This Deceptive Commercial on Dec 24, 2015
Axis' puzzling marketing campaign continues, reaching a new low. Check out...
Avigilon Buyout Potential Analyzed on Sep 08, 2015
A number of Avigilon investors and analysts have asked us about the potential...
Product / Tech Roundup ISC West 2015 on Apr 20, 2015
IPVM visited dozens of booths at ISC West. Inside is a roundup of many, but...
ISC West 2015 Show Full Report on Apr 14, 2015
The IPVM team spent 3 days on the show floor going through what is new and...
New Products Spring 2015 on Apr 12, 2015
After very poor new releases in 2014 (see Spring 2014 and Fall 2014...
Get Your Free Exacq Licenses on Mar 31, 2015
Despite Tyco employees protesting to the contrary, Tyco has now confirmed...
Milestone Systems Admits IPO Plan Lie on Feb 27, 2015
Now wholly owned by Canon, Milestone's CEO admitted that they lied about not...
Genetec's Position on Axis / Canon Deal on Feb 10, 2015
With one independent IP video company being devoured by conglomerates after...
Major Moves - Security Manufacturers 2014 / 2015 on Dec 08, 2014
This guide summarizes the biggest moves of security manufacturers in 2014 and...
Milestone Acquired by Canon on Jun 13, 2014
Wow. Industry insiders have been speculating about Milestone being acquired...
Comments (98) : Subscribers only. Login. or Join.
Loading Related Reports