Fail / Fail: The IQinVision - Vicon Merger

By: John Honovich, Published on Mar 31, 2014

One was a leader 20 years ago. The other a decade. Both have fallen far in recent years.

The solution? Merge.

Former analog mainstay Vicon and early MP champion IQinvision are planning to merge.

In this note, we break down their financials, valuation and future for the combined companies.

Financial Terms

After the merger is complete IQinvision shareholders will own 50% of the combined company, with a sad market valuation of ~$15 million USD (e.g., that's 98.8% less than Avigilon's $1.3 billion).

The companies report combined 2013 revenue of $56 million USD. Given Vicon's 2013 revenue [link no longer available] was $39.8 million, that puts IQinvision's at $16.2 million.

Their sales to price ratio is terrible at nearly 1 / 4 ($15 million market cap / $56 million revenue). A mediocre company in this industry has a ratio of 1 to 1 while strong companies are often 3:1 or even 6:1. This means the market has little faith in their ability to grow and generate profits.

For IQinVision, this implies the company is being valued at less than $10 million, poor considering the company's historical revenue and valuation.

Merger Terms

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An 8k report was released detailing the merger terms [link no longer available].

Profitability / Growth

Vicon has struggled with significant losses for years. For instance, in 2013, the company had an operating loss of $4 million.

IQinVision had its own challenges as well with layoffs and cuts over the last few years, starting with the terrible decision to oppose H.264, leading to their management shakeup, to which they never recovered.

Both companies revenue is down notably. For instance, Vicon who is now at less than $40 million annual revenue, had sales of nearly $70 million in 2007 [link no longer available].

Future

The future has been grim for Vicon for years. The IQinVision deal could help but it is hard to see that it will save Vicon from its long decline.

One positive is that IQinVision has better market recognition and reputation than the elderly Vicon. For example, in IPVM's manufacturer interest study, IQinVision scored a slightly above average 17% while Vicon was one of the lowest at 6%. While we never hear anyone ask about Vicon, some interest still exists in IQinVision.

On the other hand, the IP camera business has gotten a lot more competitive since IQinVision's prime 6 to 8 years ago, and they have lost a lot of their key talent as well.

For IQinVision, it is a disappointing ending to a very strong beginning. For Vicon, this is a last chance to rebound.

Upside

While it is hard to imagine the combined company will regain their former glory or anywhere close, there is upside, primarily because the company's valuation is terribly low.

If the company could simply stabilize itself, getting to the point where it generates a modest profit with anywhere close to their current combined $56 million, their market valuation could double or triple.

8 reports cite this report:

Manufacturer Revenue / Financials Directory on Jun 05, 2017
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Milestone Employees Defecting to Vicon on Jul 02, 2015
The hot company right now? Evidently Vicon. Vicon has been stugglling for...
Weak: Vicon / IQinVision Financials Out on Dec 12, 2014
Combined Vicon / IQinVision financials are out for the first time since their...
Major Moves - Security Manufacturers 2014 / 2015 on Dec 08, 2014
This guide summarizes the biggest moves of security manufacturers in 2014 and...
Winners Losers Fall 2014 on Oct 13, 2014
We are all losers, IPVM included. The historically poor new releases for...
Vicon CEO Losing Strategy on Sep 30, 2014
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Ex Milestone Exec Becomes Vicon CEO on Sep 11, 2014
Wow, he sure does like challenges. Just days after leaving an easy job at...
Falling Down: The 2014 Mid-Year Guide on Jun 02, 2014
Falling down - the theme of the 2014 video surveillance industry. This is the...
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