Kastle / Cernium CheckVideo Acquisition

By John Honovich, Published May 04, 2013, 12:00am EDT

Another video analytics manufacturer is gone, though no one should be surprised. Kastle Systems, a DC based managed services provider, traditionally focused on access control, has acquired CheckVideo [link no longer available] (aka Cernium). In this note, we dig into the downfall and what this means for the future of the new organization.

CheckVideo's Motivation

As our 2012 review, "Cernium Shifts Strategy Again" examined, they pivoted again and again over the last decade attempting to find a viable business. The good news was that the most recent shift from consumer smart camera (Archerfish) to CheckVideo, held promise. CheckVideo offered to integrate analytic enabled cameras and recorders directly to monitoring providers, who could review alerts, deal with false alarms, dispatch authorities, etc.

Unfortunately, we suspect the company simply ran out of time and money. Over the past decade, the company received tens of millions in funding yet had little to show for it and faced an investment market increasingly skeptical of their segment. 

Kastle's Motivation

Kastle has been pursuing video analytic monitoring for a number of years as it is a natural extension of their existing business. Indeed, Kastle publicly trumpeted using Object Video's analytics a few years ago. Since they already provideo central monitoring and have contracts with many high security facilities, upselling analytic alerts is straightforward. Then last year, the long time CTO of Cernium joined Kastle as the GM of their video division [link no longer available]. Plus, the two companies are physically near each other.

We suspect this was a natural fit - Cernium needed some way out, Kastle wanted to expand its video analytics monitoring. While they did not disclose the acquisition price, we can only imagine it was very low (millions of dollars or less). This is all the more ironic since the press release trumpets [link no longer available] that Cernium was "built on an investment of $100 Million," which makes it highly likely that the deal was done literally for pennies on the dollar.

Kastle / Cernium's Future

The company claims that CheckVideo will "remain an independently operating business unit" and that they will "accelerate and strengthen, CheckVideo‚Äôs model of working through its monitoring and reseller partners." We think this is highly unlikely.

On the plus side, having CheckVideo gives Kastle a low cost means to add on video analytics with the ability to customize / optimize them for their needs. Plus, since they will be installing and monitoring their own systems, they can eliminate the risks of third party error and overload. We suspect this will be almost all of the ultimate use of CheckVideo and this should be useful to expand Kastle's core business.

On the negative side, we doubt Kastle has the interest or organization to continue developing CheckVideo as a manufacturer that sells and services through dealers. It is basically the opposite of what Kastle has always done (they are a service provider, who manage their customers end to end).

What Does this Say?

The end of Cernium has been a long time coming so it does not reveal anything new (nor bad) about the analytics market. Their situation considered, Kastle's acquisition is a fairly good outcome that will likely be good for Kastle, but see CheckVideo ultimately disappear as an independent brand/offering.

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