Pelco - A Decade of Decline

Author: John Honovich, Published on May 16, 2016

Pelco's 2007 acquisition for $1.5 billion USD remains one of the largest video surveillance deals ever, even including the industry's recent wave of buyouts.

But the deal, nearly a decade later, has not worked out well.

Now, Pelco has a new CEO and the company is hard charging to turn things around.

In this report, we examined what happened and what Pelco is looking to do to change this.

*****'* **** *********** *** $*.* ******* ********** *** ** *** ******* ***** ************ ***** ****, **** including *** ********'* ****** **** ** *******.

*** *** ****, ****** * ****** *****, *** *** ****** out ****.

***,***** *** * *** ****** *** ******* ** **** ******** ** **** ****** ******.

** **** ******, ** ******** **** ******** *** **** ***** is ******* ** ** ** ****** ****.

[***************]

Revenue *******

** *** **** ******, *****'* ****** ******* *** ******** ~**%, from *********$*** ******* ** **** ** ~$*** ******* ** **** (*** estimate).

****** **** ****, *** ******** (**** ********* *****) *** ****** doubled ** ****. ** ***** ****** ********** **** (******* ***********), Pelco ****** ** ***** $* ******* ****** *******, **** **** 3x ***** *** ~$*** ******* **** *** *****.

Valuation **** * *******

***** *****'* ********* *******, ** ***** * **** ***** *** Pelco ***** ***** ** ** *** $*** ******* *****, $* billion **** **** **** ********* **** *** ***** ****. *********'* 2006 ********* ** ***** ** ** ******* *** ********** ****, and ***** *** ********, * ********** ********* *** ***** ** much ****.

***** ********* ** ** * *** ** ****** ***** ********* selling ***** ***, ** **** ***, ********* ***** ** ****** quite * *** ****.

Still ********** ***

**** *****, ***** ** ***** * ********** ***** ******* *** the ***** ************ ******. *** *******, **** *** ******* *** same **** ** ********, ** ***** ** *******. ******, ***** are **** * ******* ** ************* ***** **** **** $*** million ** *******; **** ***** *** **** ******* ** ~$*** million ******* (** **** ~$*** ******* ** **** ******* **** Pelco *** ** **** ****).

****, ***** * ****** ** ***** ****** ********* **** ********* significantly ** *** **** ******, *** **** ******* ***** *********** ** *** **** ***** ********* ******.

** *** ***** ****, ****** ********* **** ******** *** **** that **** *** **** ***** ** ****** **** *********** **** the **** ******, ***** ********* ** **** ** *** ***********. Indeed, *****'* **** ******** **** *** **** ****** *** **** their ********* ** ********* *****, *********** ***** *** ********* ********* with ***** ****** ***** *******.

Causes - ** *** ******** *******

*** *** ******* ******* ** *****'* ******* ****:

  • ******** ** ********- ***** *** ******** **** *** *********** *****, ********** ****** the **** - **** **** *****, ** **** ** ******* and *** ******* (*.*., *** ******* ***** ** ****** *********** ***** *** ****). *** ******** ******* ** ** ****** **** ****, *** Pelco *** *** **** ** **** **** ****.
  • ******** *******- ** *** ***-********* ***, ***** *** **** ***** *** its ****** ******** *******. **** ** ***** ****** ******** **** similar ** ******, **** ************* ********** ** ******* ****** ** customer *** ***** *******. ********* *** ****.

Back ** ****?

** *** **** *** *****, ***** *** **** **-********* *** is ********* **** ******* *** ****** ******. ******, * ***** ago, *** **** **** ** *********:

"***** ** ****. ... ** *** ************* **** **** ***** got ******** ** ********* ********, **** ***** ***** ***********, ** got ********** ******* *** * ****** ** ****.... ** **** track ** *** ********, *** ******. ** **** * ******* price *** ****."

New *** / ********** ********

***, ***** ** * *** ***,****** *******,**** *** ****** / ********** ********. **** **** ** **** ***** **** *** *** **** around, ** ** ***** **********, ** ********** *** ***********, ***** getting *** ******** ********. *** *******, ***** ** ** *** middle ** ******* ** * *** ***, ******************** **** ********** ******* ***** * ********** *****. ***** **** they *** ***** ** ******** ** ********* *** ******** ***.

**** ******** **** ***, *****'* *** *** ****** ****** *** focus *** ********* *** ***** ** ** **** ***. ******, he **** *** ******* ** ** **** ***** *** **** Pelco ********.

*******

********* *** * *** ** ****** ** ***** **** *** past ******. ** ** *** **** ** ** ** ******** to **** ***** ******, ********** **** *** ******* ******** **** China / ********* *** ******* ** **** **** *** *** heart ** *****'* ******** *** * ***** ****** ****.

***, ** ***** ** ** **** ** ******, **** **** need ** ******* **** ****** ******** **** **** **** ***** competitive **** *** **** *** ********'* ** *** ********.

Comments (12)

Two S's destroyed this company... Schneider and Sarix. Schneider went all corporate and we had around 5 sales people in as many months, and then Sarix just kept going wrong. Well they did for us..

Such a shame, I like the whole Pelco thing and the fact it was modular bullet proof kit... I hope they can get back on track.

Good article. They were slow out of the gate on IP. Then, when it looked like their product was coming back, they made this weird Rep Firm/Internal Hybrid sales model which seemed desperate at the time and has gained no traction in the last two years.

They need to emulate Axis/Avigilon/Hikvision by investing in their own Sales Reps and getting their faces out in front of old and new customers.

From speaking with him, Pelco's CEO has flatly denied any focus nor intention for Pelco to be sold off.

How come there's never a stack of Bibles around when you need them?

never a stack of Bibles

I believe him.

(1) Because of how he said it to me. Usually, if someone is going to lie, they qualify / frame their statement in a way they have an out (well except Samsung). Pelco's CEO did not.

(2) Because they are clearly focused on developing product, which is much more of a sign they are keeping it than trying to get rid of it. If they wanted to sell it immediately, it would be cheaper and quicker to cut R&D, cut costs across the board, push short term sales, and sell out.

I am not saying Pelco won't ever be sold. For instance, if this push with the new CEO does not have traction in a year or two, it could make sense than to sell.

Are we sure they have truely lost $1B? How much net revenue have they earned since 2007? Is it possible they could simply break even in a sale? Even if they did lose $1B in valuation, there had to be net gains to offset that number over 9 years, no?

Are we sure they have truely lost $1B?

I did not claim they 'lost $1B".

I claimed their valuation would be 'Down A Billion'. Think of it like stock, which it is. For example, you bought Avigilon stock at $34 in 2014, it's at ~$13 now. Avigilon's operations are not down 60% but their stock price is, and if you sold Avigilon's stock today after buying it for $34, you'd lose a lot.

Same for Pelco, whether or not Schneider generated profits or operational cash flow over the past decade from Pelco, if Schneider had to sell it now, there'd probably have to sell it for a billion less, ergo the valuation is 'down a billion'.

"There continues to be a lot of rumors about Schneider selling Pelco but, if they did, Schneider would be taking quite a big loss."

I guess when I read the article the first time, I thought it was implied here.

So, how big of a loss willie they be taking if they sell today?

The loss would be the difference from the price they paid ($1.5 billion) to the price they receive on the sale. Insert the price you think someone would be willing to pay for a company with a decade of declining revenues and ~$300 million annual sales.

My estimation is the ~$500 million range for a sales price, which would mean a loss of ~$1 billion.

Can you shed some light on how you calculated an estimated valuation of ~$500 million?

~$500 million Pelco valuation:

Assume ~$300 million annual revenue, track record of revenue decline, limited growth potential.

Historical comparables are in the 1x to 3x Price to sales range. ~1x is for OEMs or bad manufacturers; 2x is for solid companies, 3x is for strong companies.

With that rule of thumb, $300 million valuation (1x) seems low, Pelco has lots of problems but still has a premium, though receding brand. $900 million valuation (3x) seems to hard to justify because of declining sales. ~$500 is roughly in the middle.

Ultimately, companies are worth whatever the top bidder wants to bid, but based on historical comparables and Pelco's revenue / decline, ~$500 million range is sensible.

In my opinion, Pelco has an opportunity to re-emerge as a disruptor in the industry. If they were to launch a truly 100% open platform with products that truly offer value-based features and work on any VMS (yes, I understand that is a two way street), and price their products at a point where the value proposition is compelling (American made/engineered/assembled alternative to HIK, for example), then they could realistically catapult themselves back into a leadership position.

Most integrators and end-users still reflect fondly on the Pelco brand. It could be resurrected, but not with a strategy of "we're like them" where they try to emulate the other main-stream leaders. That horse left the barn when Schneider killed it. We are not going to jump onto a new Endura VMS, that's for sure, no matter how good the story may be. It is now time to re-invent the strategy and embark on a bold new direction where the brand itself is the currently dormant catalyst.

Quality products / best-of-breed customer services / Value / America / Heritage

I hate what has happened to Pelco and the Pelco brand, but you are correct that customer service was one of their primary causes for the downfall. I remember a time in 1990 when I first started in this industry. I was installing a large Pelco matrix system and needed technical support about 2 am EST. I called the Pelco answering service and the call was returned by Dave McDonald himself. For years that was indicative of Pelco's technical support. The last time I called Pelco for support about 5 years ago, I felt like I had called some offshore support center. Sad.

Login to read this IPVM report.
Why do I need to log in?
IPVM conducts unique testing and research funded by member's payments enabling us to offer the most independent, accurate and in-depth information.

Related Reports

Hikvision Admits USA Sales Falling on Apr 22, 2019
Hikvision, in a new Chinese financial filing, has admitted that its USA sales are now falling. Less than a year after the US government passed a...
Arecont Favorability Results 2019 on Apr 22, 2019
Arecont's net negativity remained the same in IPVM's 2019 integrator study, though integrator's feeling became relatively more neutral compared to...
H.265 Usage Statistics on Apr 19, 2019
H.265 has been available in IP cameras for more than 5 years and, in the past few years, the number of manufacturers supporting this codec has...
The Fastest Growing Video Surveillance Sales Organization Ever - Verkada on Apr 17, 2019
Verkada has the fastest growing video surveillance sales organization ever. In less than 2 years, they already have more salespeople in the US...
Dahua Repositionable IR Multi-Imager Camera Tested on Apr 16, 2019
Dahua has released their first repositionable multi-imager camera, the Multi-Flex 4x2MP, claiming integrated IR, true WDR, and flexible...
Strong ISC West 2019 For Manufacturers But Concerns For 2020 March Move on Apr 16, 2019
ISC West 2019 was strong for manufacturers, according to new IPVM survey results of 100+ manufacturers, consistent with 2018 results. However,...
Axis Supports HD Analog on Apr 15, 2019
In 2017, Axis declared 'Everything is IP': Now, in 2019, Axis has released support for HD analog, with their new encoders.  Why the change?...
Alarm.com Favorability Results 2019 on Apr 15, 2019
The once dot com startup has evolved to become a core provider for home security and is now expanding into commercial. In their first entry in...
ISC West 2019 Report on Apr 12, 2019
The IPVM team has finished at the Sands looking at what companies are offering and how they are changing their positioning. See below for 50+...
UK Installer CCTV Aware - Flat Pricing, No Salespeople on Apr 10, 2019
This is a different kind of company. They do flat pricing, they do not have any salespeople and 50% of their sales are sold and booked...

Most Recent Industry Reports

Hikvision Admits USA Sales Falling on Apr 22, 2019
Hikvision, in a new Chinese financial filing, has admitted that its USA sales are now falling. Less than a year after the US government passed a...
Speco Ultra Intensifier Tested on Apr 22, 2019
While ISC West 2019 named Speco's Ultra Intensifier the best new "Video Surveillance Cameras IP", IPVM testing shows the camera suffers from...
Arecont Favorability Results 2019 on Apr 22, 2019
Arecont's net negativity remained the same in IPVM's 2019 integrator study, though integrator's feeling became relatively more neutral compared to...
H.265 Usage Statistics on Apr 19, 2019
H.265 has been available in IP cameras for more than 5 years and, in the past few years, the number of manufacturers supporting this codec has...
ACRE Acquires RS2, Explains Acquisition Strategy on Apr 19, 2019
ACRE continues to buy, now acquiring RS2, just 5 months after buying Open Options. One is a small access control manufacturer from Texas, the...
Access Control Course Spring 2019 - Last Chance on Apr 19, 2019
Register for the Spring Access Control Course. IPVM offers the most comprehensive access control course in the industry. Unlike manufacturer...
Riser vs Plenum Cabling Explained on Apr 18, 2019
You could be spending twice as much for cable as you need. The difference between 'plenum' rated cable and 'riser' rated cable is subtle, but the...
Verint Victimized By Ransomware on Apr 18, 2019
Verint, which is best known in the physical security industry for video surveillance but has built a sizeable cybersecurity business as well, was...
Milestone Drops IFSEC on Apr 18, 2019
Milestone has dropped out of Europe's largest annual security trade show (IFSEC 2019), telling IPVM that they "have found that IFSEC in EMEA no...

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