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Financial Trouble Ahead?

Source: a&s International | Date: 01/13/2012

 Related tags: security, wireless surveillance, acquisition

a&s takes a closer look at a few publically listed security companies to see whether they are ready for the new year.

The changing of a year is always a time for reflection. Security players have made many attempts recently to look for new market opportunities, as well as where innovations could use more work. Predictions this year cannot be untangled from the financial troubles facing the Eurozone. Though the security industry is not extremely sensitive to economic cycles, a recession will impact the industry. Yet so far, it does not seem like the economic situation is reflected in security players' numbers. Examination of recent quarterly reports from Bio-key, Flir Systems, Digital Barriers and Axis Communications shows that sales revenue from recent quarterly reports look steady compared to previous quarterly reports.

Yet companies are still trying to reduce risk from a European presence by being more proactive in other regions. Digital Barriers made some of its first advanced sales to the Americas and Middle East recently, while also expanding sales in the APAC. Axis Communications also talked of increasing its global sales force, and presence in countries like the Czech Republic, Hungary, Turkey and Saudi Arabia.

Given that the recent economic turmoil is attributed to lack of government resources, there is evidence that public spending is down. Flir's recent quarterly reports state differences in revenue growth between its commercial systems division and government systems division. Its 2011 Q3 report states that its commercial systems division increased 16 percent from the same period in 2010, while government systems divison increased by only 8 percent. The contrast is even starker in its Q2 report, with a 32-percent increase in commercial systems revenue, while only a 4-percent increase in government systems.

Historically, however, recessions have also been one of the best times to invest in a business. That's exactly what Axis is doing. Axis has spent much of its energy in the past year hiring employees. Originally under 800 employees, its last quarterly report shows an increase to more than 1000 employees. Investing served Axis well when the economy receded in 2008, and perhaps it will serve do the same wonder this time around.

Acquiring new knowledge is always a good survival strategy for businesses, as it will enable businesses to better cater to customer needs. The trend of acquisitions in the security industry continues. Acquisitions are also important for gaining footholds in key market regions and having the resources to compete with ever-growing competitors. Digital Barriers has made several acquisitions in the past few months. In June 2011, it purchased Zimiti, a company working on developing unattended ground sensor technology. In August 2011, it acquired Keeneo, a pioneer of 3-D video analytics located in France. In November 2011, it acquired Stryker, an engineering firm that specializes on redeployable integrated wireless surveillance systems. By acquiring these companies, Digital Barriers is gaining access to knowledge that will help it strengthen its own security offerings.

Flir also made an acquisition earlier this year of Aerius Photonics, a provider of short-wavelength infrared detectors and advanced laser components.

Another way that companies try to collect knowledge and compete with others is through partnerships. Bio-key recently announced a partnership with Authentec to develop mobile identification solutions for platforms such as Android. As people become more and more accustomed to mobile devices in their everyday lives, they will want this more and more from security players. By collaborating, Bio-key and Authentec are trying to cater to the needs of end users.

Collaborating and communicating is needed to keep atop of the latest customer demands as well as maintaining business relations with other industry players. We are seeing more companies reach out using social media. Social media is becoming the preferred mode of communication among much of the global population, and is yet another way to connect. Bio-key recently launched a social media program that includes presence on Facebook, Twitter, LinkedIn, and YouTube, along with a new website.

For the time being, security players are still trying to protect their market positions and prepare for impending trouble by minimizing regional risk, investing, acquiring necessary knowledge and responding to customer demands. In the ever-changing security landscape, it will be interesting to see how the next few months pan out.