IndigoVision's CEO Resigns / Removed

Published Dec 12, 2011 00:00 AM
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UK IP video surveillance manufacturer, IndigoVision, has announced [link no longer available] that its founder and long running CEO is stepping down. This comes in the midst of IndigoVision's challenges to match the fast growing pace of the overall IP video segment. Inside, we examine the resignation, IndigoVision's most recent financial results and prospects for the future.

We asked IndigoVision why their CEO was stepping down. Their response was: "The Board wanted to change the management structure and offered Oliver deputy Chairman which he declined and chose to step down. IndigoVision has been revamping it’s management processes.  The Board really wanted to retain Oliver and that he chose to leave is in the normal course of a company’s development.  There is a depth of experienced professional management in place and highly motivated teams able to continue the growth of the company Oliver founded. He remains the largest shareholder."

Update: The former CEO has told a Scottish newspaper that he was forced out, “I was dismissed by the company – I did not leave voluntarily." That gives the impression of a bloodier exit than the company's official position.

Over the last 3 years, both IndigoVision's stock price and company revenue levels have been fairly flat. This lags behind their market segment which has roughly doubled in revenue over the same time period (e.g., Axis's stock price and revenue have roughly doubled). In our October 2011 financial note on IndigoVision we noted how a number of companies have leapfrogged IndigoVision's revenue in this period.

Recent Financial Performance

At the end of November, IndigoVision issued improved guidance [link no longer available] on their financial performance. Specifically, IndigoVision emphasized how it was their most profitable quarter ever. The company was able to significantly raise gross margins and cut overhead costs. However, revenue growth did not increase significantly.

Outlook and Analysis

While the company is clearly demonstrating ability to fine tune operations, the big challenge we see is growing their top line and holding their market share in a segment that is continuing to grow robustly. Operational efficiencies will not be sufficient to achieve this. Improving the product portolio's competitive position will be key.

We asked IndigoVision about their product plan and vision. While they declined to disclose specifics, they noted that they are spending $5 million annually on R&D. For a company with revenue in the ~$40 Million range, that is a solid percentage.

We think the big product challenge for IndigoVision is just how much more competitive the IP video surveillance market has become in the last 3 years. While IndigoVision offers quality products, the pricing is competitively high and the range of products is relatively low. By contrast and for example:

  • Milestone is forcing down the price of VMS software.
  • Avigilon is selling encoders at dirt cheap prices. 
  • Axis has gone wild introducing an incredibly broad range of cameras and now encoders.

In the same time period, IndigoVision has made some incremental enhancements to its product portfolio but not at a pace that matches industry changes.

Our guess is that IndigoVision moves into more of a niche player role where they concentrate on smaller numbers of large camera, complex projects where the need and value of an end to end, optimized solution is greater.