Samsung Surveillance Sold Off To HanwhaAuthor: John Honovich, Published on Nov 28, 2014
As part of a major move involving numerous divisions, Samsung has sold off its stake in its video surveillance business.
In this note, we examine the acquirer, Hanwha, their focus and financials, plus raise 3 critical risks that could impact Samsung's positioning in video surveillance.
The acquirer is another Korean conglomerate, named Hanwha. Though Hanwha generates ~$35 billion USD annual revenue, it is only a fraction of Samsung Electronic's size, who generates over $200 billion USD annual revenue.
Hanwha is primarily focused in defense, chemicals and life insurance. Accordingly, it has a very low recognition brand, unlike Samsung, who is routinely ranked as one of the top 10 global brands.
Hanwha is acquiring multiple businesses. In addition to Techwin, Hanwha is acquiring Samsung General Chemicals and Samsung Thales, a defense-oriented business.
Samsung Techwin / Surveillance
Samsung's surveillance offering were not part of the 'main' Samsung Electronics corporation (the business behind the phones, tablets, monitors, etc.). However, until this deal, Samsung was a part owner of the company, named Samsung Techwin, that manufactured surveillance products.
Samsung Techwin's surveillance sales are only a fraction of their business. According to Techwin's 2013 financial report, they did ~$2.6 billion in revenue. More than half of that revenue came from 'defense machines' and 'engine and turbine machinery'. Even within the Techwin division that surveillance falls under, we estimate that is a minority of that division's sales.
The net/net is that the surveillance business is a tiny part of this overall deal and that the strategic focus for Hanwha is the defense / chemical businesses, not surveillance.
Claims 'Business As Usual'
The European security group has come out with a statement:
“Hanwha Group’s investment in Samsung Techwin will enable us to continue research, design, and development of innovative market leading solutions that will create new business opportunities and ensure our future growth,” said Mr Jong Wan Lim, Managing Director of the Security Solution for Samsung Techwin Europe Ltd. “Customers can be assured that it is ‘business as usual’ and that there will be absolutely no disruption to the supply of products or to the normal high levels of pre and post sales support that customers have come to expect from Samsung Techwin.”
Key Risks / Questions
Despite the stock assurances of 'business as usual', we see three risks / questions in this deal:
- What happens to the Samsung brand? The Samsung brand carries significant weight. Will Samsung surveillance, now Hanwha, be allowed to keep using the former company's brand? If they have to change, it will cause significant confusion and difficulty marketing under an unknown name. [Update: A report from a Samsung Techwin press conference claims that a 'branding agreement [to retain Samsung's name] is still in negotiation, but is assumed to be for “many years”. How many years will be critical. One comparable is the GE Security / UTC deal where UTC was allowed to use the GE brand for 2 years. However, once that period is over, the brand is lost.]
- Will they continue to bundle / throw in Samsung products? Many industry insiders have mentioned how Samsung Techwin security group routinely throws in Samsung electronic products to help win deals (e.g., monitors). Will they have access / ability to do this now?
- Most importantly, how committed will Hanwha be to the video surveillance business? Samsung Techwin has been very aggressive the past few years in development, sales and low pricing of Samsung surveillance equipment. Will this continue? Hanwha's primary focus here appears to be the chemical and defense businesses. Will it dedicate resources to the surveillance business or will it be seen as less strategically important?
The deal is not scheduled to close until 'the first half of 2015' which likely means the full impact of this deal may not be clear for a year or longer.
VOTE / Poll
What do you think will happen to Samsung Video Surveillance business?
UPDATE - Now Hanwha Techwin
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