FLIR Acquires Lorex

By: John Honovich, Published on Oct 25, 2012

A stunning deal of a truly odd couple: Thermal camera leader FLIR has acquired home/budget surveillance specialist Lorex for $59 million. While not well known, Lorex has quietly become one of the biggest surveillance companies, on pace for ~$75 Million in revenue this year. Not only is this sizeable but the combination is extremely atypical. This deal has the potential to be a huge move for a FLIR or a comedy, I suppose. In this note, we dig into the details and analyze FLIR's plans.

[Note, for background, see the Investor's call transcript [link no longer available] which provides extensive details on the plans for this deal.]

Key Drivers

An overarching priority for FLIR is to move thermal downmarket. While the company is a powerhouse in government and critical infrastructure, it remains overwhelmingly an expensive offering for premium customers.

Lorex, on the other hand, has built the opposite business model. A high volume, low cost offering sold through mass market distribution, online and through big box retailers (e.g., Costco [link no longer available]).

In the best case scenario, opposites attract and they complement each other perfectly.

To that end, Flir identified 3 key drivers:

  • "Adding thermal imaging to Lorex's emerging Digimerge brand"
  • "A professional security-grade security systems (Digimerge)" that they plan to sell into the professional security market
  • "Addition of FLIR's international distribution to Lorex's strong North American presence"

The last point is strategically the most insignificant. Even if Flir can help sell more Lorex products internationally, it will not have much impact on the market overall. However, the other two are quite significant.

Adding Thermal on the Low End

Flir really wants to expand on the low-end:

Get Notified of Video Surveillance Breaking News
Get Notified of Video Surveillance Breaking News

"This is right in line with what we've publicly stated as our strategy for a long, long time, introducing active thermal into places like Costco and other direct, if you will, marketing activities that these folks do, has clearly been in our strategy for forever so to speak."

Even today, a 'cheap' Flir thermal camera is $5,000 while a typically Lorex camera is a few hundred, at most.

They see Lorex as a vessel to deliever and distribute thermal into the lower end professional / consumer market:

"What we really see here are the ability to take our technology and insert it into their product line, which we think will be significantly positive both in terms of revenue growth and margin."

The clear plus is that Lorex knows how to move lots of cameras. Flir cites Lorex's annual unit sales at 500,000+ cameras, showing that Lorex can operate at far higher volume scale than Flir who is optimized for small numbers of extremely expensive cameras.

The best comparable we see is DRS Technologies who has stormed the surveillance industry with thermal network cameras that are far less expensive than what anyone else offers, including Flir.

Competing Against Axis, Bosch, Pelco Head On

Even more interestingly, Flir is gearing up to deliver an end to end array of security cameras, not just thermal:

"Many of those customers that we call on today, I think, would be more than happy to be buying a full suite of products from FLIR and not just a thermal camera from FLIR."

To do so, they are targeting Lorex's Digimerge brand:

"The area of focus, I think, an intersection with FLIR will be at the Digimerge side, which is the professional integrator series of product. And that's where our sales organizations, I think, have a convenient overlap, a beneficial overlap on the integration side."

While Digimerge is a 'professional' offering, it is certainly on the lower end of the market. Nonetheless, they are looking to take this to go head to head against the biggest players in the market:

"Today, an integrator might pick a FLIR thermal camera and then combine it together with a Pelco, Axis, Bosch, something like that, enterprise-grade camera. And we feel that we can offer to that integrator an enterprise class of a product that will have a compelling value proposition versus those competitors. And at this point, those aforementioned companies are companies that are starting to compete with us as well in the thermal space. So I think we're more than willing to take on that level of competition."

While Pelco, Axis and Bosch are all incurring into the thermal market, we are skeptical of Flir's ability to return fire in the conventional camera market through Digimerge anytime soon. While Lorex has very innovative products for the home market side, they need extensive development to truly challenge Axis, Bosch and Pelco.

Conclusion

While the strategic plan has risks, the price paid was reasonable. Flir is acquiring Lorex for ~$60 million USD, notably less than Lorex's projected 2012 revenue of ~$75 million USD. And given Flir's ~$3 billion market capitalization, it is a relatively tiny acquisition. However, it is a significant strategic gambit that, if executed, could greatly expand Flir's position in the market or could make them look foolish for such a gambit. Time will tell and this will certainly be an interesting one to watch develop.

10 reports cite this report:

Dahua Acquires Lorex And FLIR SMB Surveillance From FLIR on Feb 06, 2018
Would you buy your own customer? Well, Dahua has just done that. FLIR has sold its Lorex / home / SMB business to Dahua, just over 5 years after...
FLIR Security Business Struggling on Aug 02, 2017
FLIR's security division is an ambitious mix of FLIR's core thermal business plus multiple acquisitions, including of retail / consumer offering...
Manufacturer Revenue / Financials Directory on Jun 05, 2017
This report contains data on the revenue of 32 security manufacturers, trend analysis of whether they are gaining or losing ground and commentary...
FLIR Favorability Results 2016 on Dec 14, 2016
FLIR has been buying companies one after the other, expanding from its foundations in thermal imaging into an end-to-end video surveillance...
FLIR Security Revenue Reviewed on Oct 31, 2016
With acquisitions of Lorex, DVTel and ISD, adding to their core thermal offerings, FLIR has been building up its presence in the security / video...
FLIR Buys Point Grey For $253M on Oct 04, 2016
FLIR's acquisition streak continues, announcing an acquisition of Point Grey Research for $253M in cash. Other notable FLIR deals include: FLIR...
FLIR Acquires DVTel on Nov 30, 2015
Originally a thermal imaging specialist, FLIR is making a major expansion into 'conventional' video surveillance by acquiring DVTel [link no longer...
Infinova Acquires Swann on Oct 21, 2014
3 years ago, a Chinese / US surveillance manufacturer, Infinova, raised $300 million cash in a billion dollar plus IPO. Later that year, they...
Google Acquires Dropcam For $555 Million on Jun 20, 2014
Google, via its Nest Labs subsidiary, has acquired home security specialist Dropcam for $555 million USD. Revenue IPVM estimates Dropcam's 2014...
Winner and Losers of the Milestone Deal on Jun 16, 2014
An industry changing event. Canon's acquisition of Milestone will impact the industry for years to come. But who fared the best and worst from...
Comments : PRO Members only. Login. or Join.

Related Reports

Sales Cuts At Rasilient on Feb 19, 2019
Over the past 2 years, video surveillance storage specialist Rasilient has expanded its workforce significantly, aiming to build its own branded...
Qognify Dropping Seetec and OnSSI Brands on Mar 01, 2019
Qognify is dropping both the Seetec and OnSSI brands, just over 2 months after acquiring OnSSI / Seetec and a week after sweeping cuts to the...
Pelco Sold Off, Now Independent on May 28, 2019
Pelco has been sold off by Schneider Electric, completing Schneider's terrible tenure, but giving Pelco a chance at life. IPVM spoke with...
Panasonic Sells Off / Spins Out Security Business on Jun 02, 2019
Panasonic has sold off its security systems business to a private equity firm, after suffering years of challenges. The new company, which will...
OpenALPR Doubles Prices on Jun 06, 2019
There is no 'race to the bottom' in cloud / AI video surveillance. In May, Verkada increased their prices. Now, OpenALPR is doing the same with a...
Fujifilm Expanding Into Video Surveillance on Jul 26, 2019
While Sony continues to fade out of the video surveillance market and Canon continues to make huge investments into acquiring video surveillance...
Acquisitions - Winners and Losers on Dec 10, 2019
Most major manufacturers have been acquired over the last decade. But which have been good deals or not? In this report, we analyze the...
Struggling Arcules Changes Chief Revenue Officer on Oct 29, 2019
Canon / Milestone spinout Arcules has struggled, now changing their Chief Revenue Officer, just a year after he came on board. The issue is not...
Resideo CEO To Step Down on Dec 03, 2019
Resideo's CEO, Mike Nefkins, is stepping down, just 18 months after being brought in to lead the now plagued spin-out. Inside this note, we...
Pelco Is "Bringin Blue Back" on Dec 17, 2019
Pelco is "BRINGIN' BLUE BACK", according to Pelco's new CEO Kurt Takahashi’s presentation at the Imperial Capital Security Investor...

Most Recent Industry Reports

"Hikvision Football Arena" Lithuania Causes Controversy on Jan 24, 2020
Controversy has arisen in Lithuania over Hikvision becoming a soccer team's top sponsor and gaining naming rights to their arena, with one local MP...
Axis and Genetec Drop IFSEC 2020 on Jan 23, 2020
Two of the best-known video surveillance manufacturers are dropping IFSEC International 2020, joining Milestone who dropped IFSEC in 2019. The...
Multipoint Door Lock Tutorial on Jan 23, 2020
Despite widespread use, locked doors are notoriously weak at stopping entry, and thousands can be misspent on locks that leave doors quite...
Avigilon Shifts Cloud Strategy - Merges Blue and ACC on Jan 23, 2020
Avigilon is shifting its cloud strategy, phasing out its Blue web-managed surveillance platform as a stand-alone brand and merging it with its ACC...
Verkada Paying $100 For Referrals Just To Demo on Jan 22, 2020
Some companies pay for referrals when the referral becomes a customer. Verkada is taking it to the next level - paying $100 referrals fees simply...
Camera Analytics Shootout 2020 - Avigilon, Axis, Bosch, Dahua, Hanwha, Hikvision, Uniview, Vivotek on Jan 22, 2020
Analytics are hot again, thanks to a slew of AI-powered cameras, but whose analytics really work? And how do these new smart cameras compare to top...
Intersec 2020 Final Show Report on Jan 21, 2020
IPVM spent all 3 days at the Intersec 2020 show interviewing various companies and finding key trends. We cover: Middle East Enterprise...
Vehicle & Long Range Access Reader Tutorial on Jan 21, 2020
One of the classic challenges for access control are parking lots and garages, where the user's credential is far from the reader. With modern...
Clearview AI Alarm - NY Times Report Says "Might End Privacy" on Jan 20, 2020
Over the weekend, the NY Times released a report titled "The Secretive Company That Might End Privacy as We Know It" about a company named...
Favorite Camera Manufacturers 2020 on Jan 20, 2020
The past 2 years of US bans and sanctions have shaken the video surveillance industry but what impact would this have on integrators' favorite...