Fail / Fail: The IQinVision - Vicon Merger

By John Honovich, Published Mar 31, 2014, 12:00am EDT

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.

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