Here's What Avigilon Should Do Now

Author: John Honovich, Published on Aug 24, 2015

An Avigilon partner asked:

"What would be your Goal if you run Avigilon?"

Given Avigilon's 60% stock price drop since last year, the continued executive exits / ousters, the declining growth, and weak profitability, Avigilon needs to change. However, the company has a strong product offering that can help in a turnaround.

To answer the Avigilon partner, here are the top 4 things I would do:

  • Fire Schmode, Hire Nilsson
  • Divest or RAND the Patents
  • Launch a Low-Cost Line
  • Push Video Analytics Development Hard

Inside, we break them down, including polls / voting on each one.

********** ******* *****:

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The *******

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Fire *******, **** *******

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****:

Divest ** **** *** *******

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****:

Launch * ***-**** ****** ****

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What ***** *** **?

******* ** *** ******** *****.

Comments (29)

With the only game in town (Wetsern hemisphere) being the Chinese and possibly Samsung with their China beater range (Their words), it does and doesn't make sense for them to launch a "low cost" camera range. Will the Chinese let them and others produce tooling and marketing, then just come back in with an even more aggressive pricing strategy.

The future is analytics. With the money that Avigilon has "invested" in this technology lately, it looks like they are trying to own the this space. They should draw a line and stop trying to make money on copywright infringements and making lawyers even more money.

Prove that their offering works and be one of the first companies to launch a truly root to branch offering at a price that makes everyone feel happy about looking in the mirror each day.

"then [The Chinese] just come back in with an even more aggressive pricing strategy."

How much lower can they do? Will they give cameras away for free? :)

I do not think that Avigilon (or Axis) should price match. There's no need nor benefit to chase them that hard.

However, they need to keep the gap to defensible levels. For example, if you have an integrated IR fixed focal minidome at ~$150 dealer pricing, that's still 50% or so more than 'the Chinese' but at least you are in the ballpark and can justify a modest premium based on service / support / deep integration, etc.

Low cost camera solution. Partner with the China provider for a hardware solution. Off the shelf. Change nothing.
Add in house developed software completely replacing the OEM software.

It's highly unlikely they can make hardware cheaper than a mass producer. Yet they could retain the unique product aspect with compatibility on their own exisiting lines and have minimal development time.
They control the features, functions, integration and cyber (I hate that word) security.

Low cost camera solution. Partner with the China provider for a hardware solution. Off the shelf. Change nothing.
Add in house developed software completely replacing the OEM software.

Please NO Keep all the hardware inhouse. Like John said all we need is a fixed dome and bullet with IR that is lower cost but it doesn't need to be as cheap as china gear.

There is such disincentive for the major (and even minor) VMS platforms to embrace Avigilon until any chance of patent infringement pursuit by Avigilon is eliminated it would be prudent to focus first on establishing trust before work on anything else. Dump or neuter the potential for patent actions, then begin rebuilding from the disasterous current state of affairs.

Nilsson could be the first step in rebuilding, but it will be a Herculean effort.

Given Avigilon's focus (revenue growth, revenue growth, revenue growth), that they are alienating the rest of the industry is not much of a concern. Ultimately, I think in the next year, slowing revenue growth will eventually be connected to the cultural / management problems, which might then lead to a change in overall industry positioning.

However, there is a good chance that the more Avigilon struggles, the more it will lean on the patents as a way to generate profits quickly.

Fire Schmode, Hire Nilsson

This would be tricky to actually do. Nilsson undoubtably has been handcuffed to the deck of the ship by the recent Canon acquisition. Non-compete's are standard here, lasting 3-5 years, if not more. In the shorter term, there are presumably financial incentives in place that would be forfeited by an early departure as well.

On the flip-side, one would have to imagine someone as shrewd as Schmode would have put in place an expensive golden parachute for himself, adding to costs.

Maybe an amicable trade could be worked out, after all, one could argue that Axis needs to have an 'Alec Baldwin' type to come in and motivate the overly content and complacent sales organization. Ok, now that's far fetched...

Counterexample: Fullerton went straight from Milestone to Vicon.

However, evidently Massachusetts does allow some non-competes. As you know, in CA, not allowed.

Schmode got $2.5 million in total compensation in 2014, so they should be able to slot Nilsson in at the range...

As you know, in CA, not allowed.

Except when the agreement is part of the sale of the entire company and the employee is viewed as part owner and gains significantly from the sale.

Nilsson's million dollar payday would give such an agreement teeth in any state.

Fullerton, seemed to be at odds with management over the years, so may not have been bound by an airtight agreement, on purpose. In any event, coming in 8 years later than Nilsson and given the price paid for Axis vs. Milestone, his 'liquidity event' may have been a good deal less.

According to the Axis 2014 annual report, Nilsson has 23,5000 shares, which is ~$1 million USD, or as Schmode likes to call it, January through May pay.

In terms of agreements and the terms of them, neither of us know, so hard to guess.

Nix Nilsson and give Rance a chance...

Rance is an 'end-to-end solutions' man!

Might really not be a bad idea! Rance was ahead of his time for Panasonic, and he's generally well respected. Not quite as jarring as a jump to Nilsson. I'd buy that.

Rance is also unemployed so that, in itself, makes it easier...

With Avigilon stock already depressed and now the market under pressure, is there potential that a stock deal acquisition could be made? Not sure what their debt position is but I suspect it is a detractor but could the patent assets offset that?

Avigilon has a strong name and channel, just needs some better execution and something that will tell the market that the product is stable for the foreseeable future. Stability is something I worry about when choosing a long term strategy for an enterprise.

An acquisition? Could be.

The barrier will be Avigilon's board. They clearly, rightly or wrongly, believe Avigilon is worth way, way more than the current stock price. Their market cap is~$600 million right now (stock price at $13.30). If someone offered say a billion, surely they would have the fiduciary responsibility to consider it but their position so far has been that they are on the fast track to $500 million in revenue, so they should be worth 3 times, 4 times or more that.

VideoIQ was the king in the "virtual guard" domain. Guard companies in order to stay competivie will have to offer a combination of "vitrual guard" and onsite security officers or replace onsite officers with a "virtual guard" solution. That means the demand for their product will increase. The VideoIQ camera was a stand alone solution that worked. They need to bring back the videoiq model where the license was included with the camera purchase and no need for a VMS. They also need to either sell directly or through distribution.

I would recommend you contact your Avigilon RSM. The HD Edge Recorder is what you are looking for.

I was told at ISC West that the VMS was needed in order to send notification to a central monitoring station. That means another piece of hardware.

I will find out tomorrow as our first unit comes in though I don't see why it couldn't compunicate with center stations on it's own.

Mike, No other hardware is requred, the VMS is built in as always. Of course you need a workstation to run the client and Gateway if desired.

Gateway meaning WAN/LAN router?

Gateway meaning the Avigilon Gateway. which is used for smartphone access to the system

Thanks! I think I've got it:

You are saying that the Avigilon HD Edge Recorder can communicate directly to a remote Central Station, over a WAN, without needing the Gateway?

Confirmed no other hardward is needed besides a WAN/Router connection.

"Fire Shmode" as a poll on IPVM is a significant statement about the state of things in our business. There are other polarizing figures in our industry (I can think of one or to at Arecont, Sony, Vicon, etc.) but this "cartoon" character takes the cake. I have heard pretty bad stuff about Alex too, but hey, he likes a guy like Shmode and didn't like a lot of quality people that didn't last very long at Avigilon. Not naming names. Alex seems to likes having vicious people around him.

If you are going to use acronyms such as RAND, please define them up front in your articles. What makes you think that your typical subscriber/reader can decipher such arcane abbreviations?

Whenever I fail to understand the terminologies I just sacrifice a few chickens.

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