Last week, thermal camera maker Flir announced that it had entered into an agreement to acquire Canada-based surveillance camera manufacturer Lorex for CA$59 million. Based in Canada, Lorex predominantly makes cameras for the small business and consumer market under the Lorex and Digimerge brands.
While the acquisition may appear puzzling from outside looking in, a leading manufacturer of high-end thermal cameras for military and commercial security applications buying a relatively small company that makes surveillance cameras for do-it-yourself projects, Andy Teich, president of Flir’s commercial systems division, said that the move is part of the company’s goal to bring thermal technology to a broader customer base.
"It plays into our strategy of not where we are today, but where we are headed," Teich said of the acquisition. "We’ve told our investors for some time and have been executing along the lines of a continual reduction of the costs of thermal imaging technologies with the ultimate goal of providing thermal imaging technology to a very broad base of users at very low cost."
Teich said he believed that thermal imaging will follow a similar path to that of GPS, which essentially went through four different phases before it saturated the consumer market. It initially began as a very expensive technology for the military, followed by a "dual-use" phase in which it was being used by both the military and industry. That was followed by a "broad commercialization" phase in which price points fell to around $1,000 and started to show up as in-car navigation systems. Teich said the technology is currently in the "commoditization" phase and has become ubiquitous in many of the devices we use today, such as cell phones and tablet computers.
"That four-phase transition of a technology from military to consumer, you’ll see that same thing play out with thermal imaging and we, as a company, have been leading that transition and will continue to do so," he said. "We have significant investment in technology and equipment underway right now to make the next step in lowering costs to enable (the creation) of that lower cost technology that users in the security space are going to be interested in."
Teich added that Flir’s acquisition of Lorex in the security market follows similar purchases by the company in other industries. For example, in 2007, Flir bought Extech, which makes handheld test and measurement equipment because as costs came down in thermal technology for the thermography segment (devices designed to detect temperature changes), Teich said they were getting closer to the price points of traditional test and measurement lines of products. Eventually, Teich said Flir came out with a line of Extech thermal imaging cameras. And though Flir had been in the maritime space since 2006, making thermal cameras for navigating at night and things along those lines, the company acquired marine electronics maker Raymarine in 2010 for many of the same reasons and subsequently came out with a Raymarine branded line of thermal equipment.
"This strategy of starting in a vertical by ourselves, developing it overtime, pushing the costs down and then acquiring a company that has strong access to that lower cost, higher volume market is something we’ve played out twice before," Teich explained. "And what you’re seeing here with Lorex is that same strategy just manifesting itself in the security market vertical."
Teich said Lorex has a "very nice mix" of technology, adding that they are a leader in DIY market and that they also have a strong presence in retail stores that carry their equipment, as well as online. He said they also have a integrator-level business with their Digimerge line of products.
"As we produce this lower-cost thermal imaging technology, we believe that can be injected into those verticals where Lorex is currently active and offer the Lorex/Flir brands a highly differentiated product that can drive a lot of growth," he said.