March Acquired by Infinova

Author: John Honovich, Published on Dec 08, 2011

Shockingly, long time DVR leader March Networks has agreed to be acquired by Infinova a US/Chinese video surveillance manufacturer. Over the past year, signs and speculation increased that March Networks was up for sale. However, to be acquired by Infinova is simply stunning. We think this combination has a high risk of being unsuccessful over the next 3 - 5 years.

An Overview of the Deal

The plan is for March Networks to be an independent operating subsidiary of Infinova, retaining their own brand and organization. The companies see a number of potential benefits:

  • Infinova's regional strength in the high growth Asian markets can help March Network's sales
  • Infinova's manufacturing can help reduce the cost of March Network's hardware
  • The combination of the companies R&D teams may help in the design and manufacturing of new products

Why This Deal Occurred

Here's the forces we believe brought this deal together:

March has been struggling to make the transition from DVR leader to IP video provider. In the past 5 years, their stock price dropped more than 75%. While they had a number of growth quarters recently, over that same time period, revenue has been roughly flat. Plus, today, March announced a terrible quarter with revenue dropping over 20%.

Infinova's main claim to fame is a monster IPO that provided them a huge cash warchest. Otherwise, the company is a mid tier surveillance player, both in terms of revenue (roughly the same as March) and products (generally not highly regarded). That noted, with so much cash and a huge valuation (~10 times March Networks), they had motive and ability to expand.

The acquisition price, ~$90 Million CAD, was fairly modest with March Networks being valued at a price to sales ratio of 1 (even less, if you factor in that March has ~$40 Million cash in the bank, noted in the FY2011 financial report). By contrast, Infinova is valued at closer to a 10/1 ratio. It is certainly not an expensive deal for Infinova.

For March, the deal is all cash so once the deal closes they do not have downside risk of Infinova's stock going down.

The Risks

Get Video Surveillance News In Your Inbox
Get Video Surveillance News In Your Inbox

We see a number of risks in the mid to long term about the combined entities:

  • Infinova is incredibly overvalued relative to any video surveillance company not traded in the Chinese stock market. We believe Infinova's valuation is unsustainable and reflects exuberance / a bubble in China. If the China stock market falls, a drop in Infinova's stock price of 80%+ would not be surprising at all. When bubbles pop, company operations can be severely disrupted. 
  • Infinova has never had a strong competitive position in the market. They have primarily replicated product offerings that Pelco and AD offered. At best, there are some incremental operational efficiencies but no clear plan of how to compete against the growing power players like Axis and Hikvision or establish a clear niche that they own like Mobotix or Genetec.
  • Infinova and March have both struggled to really compete against the best VMS and IP camera players. Putting them together does not solve this. Indeed, it might actually be more difficulty with engineering teams around the world and potential power struggles amongst the two organizations.

Gut feel is that this combination will see a gradual decline in competitive positioning if and until a major correction occurs in the China stock markets were I think major problems within the company are likely.

Here's March Network's CEO explaining why they did the deal. Note heavy emphasis on it being all cash. Also, while this may look like a news interview, it is a staged PR effort:

Update: Interesting critical article on the March deal from local Ottawa newspaper.

5 reports cite this report:

Fullerton Out At Vicon on Aug 05, 2016
One of the biggest names in the industry, Eric Fullerton, has resigned as Vicon CEO. Just shy of two years ago, Fullerton left Milestone to take...
Avigilon Poison Pill Preps For Sale on Jan 12, 2016
Avigilon soon may no longer be an independent company, but Avigilon's CEO is determined to control his own destiny. After 2 years of punishing...
Avigilon Buyout Potential Analyzed on Sep 08, 2015
A number of Avigilon investors and analysts have asked us about the potential for Avigilon to be bought out / taken over. Basically, with the...
Infinova Acquires Swann on Oct 21, 2014
3 years ago, a Chinese / US surveillance manufacturer, Infinova, raised $300 million cash in a billion dollar plus IPO. Later that year, they...
March Sets Up Poison Pill, Impact on Future Acquistion on Jul 26, 2010
March Networks has set up a "Shareholder's Rights Plan," more commonly referred to as a "Poison Pill." Such plans/pills can provide protection or...

Related Reports

Chinese 'Attacking Us From Every Direction', Says US FBI on Apr 25, 2017
"Chinese eating our lunch. Attacking us from every direction" said the US FBI's Deputy Director Andrew McCabe at the ASIS 2017 CSO Summit. .@FBI...
Dell EMC Surveillance Division Profile on Apr 20, 2017
With revenue growth from traditional IT customers slowing, Dell has set a focus on the security industry as a market where the company can offer...
Longse Wants To Be Your OEM on Apr 18, 2017
Hikvision, Dahua, another China rival is out for you.  The outlaw Guangzhou manufacturer Longse recognizes the growing conflict for Hikvision...
Hikvision Aims For #1 Brand In 2020 on Apr 03, 2017
Hikvision's Chairman and Communist Party Secretary told Xi Jingping his gift for the Communist Party's 100th anniversary in 2020 will be to make...
Chinese Government Spies on Churches With Video Surveillance on Mar 27, 2017
The Chinese government is using video surveillance to spy on churches in China, reports UCANews, explaining: The [Chinese government]...
Hikvision Removing Auto 'Phone Home' on Mar 24, 2017
Facing pressure over their cameras auto phoning home and their Chinese government ownership, Hikvision has begun quietly removing automatic...
Hikvision Attacks IPVM on Mar 20, 2017
Hikvision has attacked IPVM repeatedly over the last month, both in the international press and in its dealer communications. Attacks Listed On...
ObjectVideo Acquired by Alarm.com on Mar 14, 2017
Once potentially the most recognized name in video analytics, ObjectVideo has effectively been sold for pieces. Alarm.com has now acquired what...
Axis: Minimal Made In China Products, Ending This Year (Except For In China Sales) on Mar 13, 2017
A member recently asked about where Axis is made because a school had raised concerns about the "security of Chinese manufactured cameras."  Here...
Hikvision Firmware Decrypted on Mar 09, 2017
A developer has decrypted Hikvision's firmware, allowing examination of Hikvision's device source code and contents. In this report, we overview...

Most Recent Industry Reports

Avigilon Discontinuing Rialto Analytics Line on Apr 27, 2017
Avigilon is informing dealers/partners that the legacy VideoIQ Rialto products have been discontinued, recommending the newer ACC ES Analytics...
A Marketing Home Run For Knightscope - Man Attacks Robot on Apr 27, 2017
We criticize Knightscope regularly - their lack of revenue, their trying to fool mom 'n pop investors, their associating themselves with a clueless...
The World's First Fashion IP Camera From Amazon on Apr 27, 2017
Some analytics cameras can tell you if a person is jumping a fence, or loitering in a secure area, but none of them can tell you if the person...
Last Day - IP Networking Course May 2017 on Apr 26, 2017
Today is the last day to register for the May IP Networking Course. This is the only networking course designed specifically for video...
Hikvision EZVIZ Amazon Scam Revealed on Apr 26, 2017
Hikvision is violating US Federal Trade Commission guidelines and Amazon rules with a "Honest" Review Program scheme that provides gift cards to...
Anixter CEO Admits Price Deflation and Non-Exclusive Integrator Sales on Apr 26, 2017
Anixter's CEO has admitted to (1) price deflation impacting IP camera sales and (2) not always being 'exclusive' with security integrators. In...
Xandem Next Gen Intrusion Tested on Apr 26, 2017
Xandem's "full coverage motion tracking technology" is unlike any intrusion technology we have seen. We bought their new system and tested it...
Tri-Ed Favorability Results on Apr 25, 2017
Tri-Ed, owned by Anixter, far outranked Anixter, the lowest ranked company in our distributor favorability series. Still, Anixter's ownership did...
Eagle Eye Exec On Mountain Of Servers - VSaaS Growth Analysis on Apr 25, 2017
Eagle Eye VP of Operations, Hans Kahler, posted a picture of himself sitting on top of a shipment of new servers, as a testament to the companies...
Chinese 'Attacking Us From Every Direction', Says US FBI on Apr 25, 2017
"Chinese eating our lunch. Attacking us from every direction" said the US FBI's Deputy Director Andrew McCabe at the ASIS 2017 CSO Summit. .@FBI...

The world's leading video surveillance information source, IPVM provides the best reporting, testing and training for 10,000+ members globally. Dedicated to independent and objective information, we uniquely refuse any and all advertisements, sponsorship and consulting from manufacturers.

About | FAQ | Contact