High growth of surveillance market cannot sustain all manufacturers

Merger of Vicon and IQinVision evidence that life is getting tougher in the video business

Avigilon, founded in 2004 with sales currently running around $250 million, is approximately a third of the size of Axis Communications but its growth in 2013 was 100 percent and it has a market capitalization of around $1 billion. Just like Axis, this performance was achieved by organic growth, but in the last 18 months it has made some significant strategic acquisitions.

In 2013, they acquired two companies. In May, they acquired privately held RedCloud Security, Inc. a provider of web-based, physical and virtual access control systems. Through the acquisition, Avigilon adds a complementary product line to its end-to-end high-definition surveillance solution and provides the company with access to a growing segment of the global security market. Despite it being a different product, it fits in neatly with their existing distribution network.

In December, they announced a definitive agreement to acquire the video analytics company VideoIQ, Inc. for cash consideration of $32 million. Founded in 2006, VideoIQ has a developed portfolio of video analytics intellectual property with 23 patents granted or pending. This fits in directly with their existing business. Both of these acquisitions should deliver much more revenue than both companies achieved in 2013 and, at the same time, will provide their system integrators with a more comprehensive solution.

Avigilon has shown that the growth predictions they are aiming for will require filling in the gaps with strategic acquisitions.

Axis has so far retained its policy of growth through organic development which has proved to be a great success. Could they have grown faster through acquisition? Would they have pushed back the barriers to IP networking faster? No one will ever know.

For more information on the global market for video surveillance, visit http://www.memoori.com/portfolio/thephysicalsecuritybusinessin2013/.