Weak Growth Resumes for Axis (Q3 2012)

Author: John Honovich, Published on Oct 17, 2012

Bad news for Axis alone or bad sign for the entire market? Now, for three of the last four quarters, Axis has turned in weak growth. In this note, we dig into the trend, the issues and Axis's plan for the future.

Background

Last quarter (Q2 2012) was excellent, at 31% growth. Prior to that (Q1 2012) it was 6% and the last quarter of 2011 was 22%.

Now, for Q3 2012, growth was 8%. Overall, for 2012 to date, growth is 14%. [Note: all measured in local currency terms to avoid exchange rate fluctuations.]

For an analog/legacy company, even this would be strong (though unsteady). For Axis, it is far below their historical pace, and significantly lower than their own guidance and general market projections.

Drivers / Key Issues

Axis's Q3 2012 financial report and powerpoint presentation do reveal some interesting datapoints:

  • Geographical Split: Europe remains weak at 6% but the bigger issues was the Americas growing at only 7% (far below their historical pace). Asia grew the most at 20% but that's on a very small base and in a region that is supposed to growing even faster.
  • Causes: Axis cites 'economic uncertainty' and admits 'some caution among our partners' and that 'sales slower than expected'. At the same time, the company is still expects 'long term growth potential of 25 percent per year'.
  • Declining Spending: Both R&D and Sales & Marketing expenses dropped notably quarter over quarter for the first time in 2 years.
  • Profits: Both net and gross profits were relatively unchanged from the few previous quarters.
  • Future Focus: Axis highlighted two key areas for growth: emerging markets and small installations.
  • Revenue: Revenue for 2012 will be ~$600 million USD

Future

Axis is betting on growth outside of Europe and North America to drive its expansion. While they cite projections for the global video surveillance market average 14.1% growth from 2011 to 2016, most of that projection is based on emerging markets like the BRIC countries. Not only will it be interesting to see if those countries can achieve these bullish projections but it will also be an accomplishment if Axis can become a major player there (today, e.g., only 11% of Axis's revenue is from Asia and its growth rate in that region has been modest).

For growing small installations, Axis desires "increased availability for end customers" and "market penetration through more system integrators" though this is like saying the Pacific Ocean needs more water. How they execute on these goals will be important and worth watching.

Our View

With Europe's overall economic conditions remaining so weak, it is a drag on growth for nearly everyone in the industry who operates there (and especially for Axis who until recently generated ~50% of their revenue there).

In America, we see two potential issues:

  • Transition in Latter Stages: As IP has become so well accepted for professional use, the easy growth of replacing analog is becoming harder to come by. Over the next few years, the growth rate of the IP market will likely converge to the lower rate of the overall surveillance market.
  • Scaling: Axis is so big now in the Americas (over $300 million USD in revenue this year) that it is likely becoming hard for them to grow at their historical 30-35% rate (to do so would be the equivalent of acquiring an Avigilon each year).

The one thing we clearly see in Axis's favor is their unrivaled new product development. They continue to release more, high quality, innovative products that anyone in the market. Regardless of their growth levels, their strong competitive position should remain until and unless they weaken R&D.

1 report cite this report:

Axis In Denial, Q3 2014 Financial Report Bad on Oct 16, 2014
Axis Q3 2014 numbers are bad. But their outlook is still rosy. [Update: And Q4 2014 numbers are just as bad.] The company has struggled to...
Comments : PRO Members only. Login. or Join.

Related Reports on Financial Updates

ADT Stock Drops After Announcing Loss And Amazon Delay on Mar 12, 2019
ADT's stock price dropped significantly after reporting heavy losses and delays in its Amazon partnership, as seen in the screenshot below: In...
Hikvision 2018 Revenue Tops $7 Billion USD But Growth Slows To Low on Feb 15, 2019
Hikvision's annual revenue topped $7 billion for the first time in 2018, although growth slowed sharply. In this post, we analyze the latest...
Barnes Buchanan 2019: Despite 'Strange Narrative' Great Time To Be In Security on Feb 11, 2019
A "strange narrative" is being spun, said Michael Barnes at the 2019 Barnes Buchanan Conference. However, despite that narrative, it is a "great...
Hikvision Growth Declines Q3 2018 on Oct 22, 2018
Hikvision's growth continues to decline in 2018 going from: Q1 - 33% Q2 - 22% Q3 - 14.6% In this note, we examine Hikvision's newest Q3...
Axis Strong US Growth, Flat EMEA - Q3 2018 Financials on Oct 18, 2018
This spring, Axis had its best financials in many years (see Axis Strong Q2 2018 Results). However, over the summer, Axis had many products sold...
Axis Strong Q2 2018 Results on Aug 20, 2018
Axis reported strong Q2 2018 financial results and, for the first time in many years, Axis grew faster than Hikvision. However, the company's...
Hikvision Strong Domestically, International Business Struggles on Jul 25, 2018
Hikvision's H1 2018 results are out. Overall revenue growth has sharply dropped, with the company acknowledging their "facing geopolitical...
Arlo IPO Filing Reveals Key Financial and Competitive Details on Jul 09, 2018
Arlo is going to IPO at a projected valuation greater than Axis. Now, Arlo has released their 175-page Form S1 Registration Statement for its...
Milestone 2017 Financials Examined on Apr 24, 2018
For ISC West 2018, Milestone released ... their financials, touting "strong revenue growth in 2017". However, there were discrepancies with the...
ADT Hammered Again, Loses Another Billion In Market Cap on Mar 16, 2018
ADT's CEO told investors that, 'in baseball terms', ADT was batting 5 for 5. But investors told ADT's CEO, 'in baseball terms', that he was...

Most Recent Industry Reports

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 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...
Door Operators Access Control Tutorial on Apr 17, 2019
Doors equipped with door operators, specialty devices that automate opening and closing, tend to be quite complex. The mechanisms needed to...
Securadyne CEO: IPVM 'Entertaining For An Ignorant Few' on Apr 16, 2019
Securadyne's CEO Carey Boethel is unhappy with IPVM's report - Failed Integrator Rollup, Securadyne Sells to Guard Giant Allied. Indeed, he...
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...

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