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Growing Profits in Lean Times PartⅠ
by a&s International 2010/11/30

While the recession has increased budget offerings and driven prices down, a number of companies still managed to grow their profits. We find out more about their growth factors and differentiators for success.

While the recession has increased budget offerings and driven prices down, a number of companies still managed to grow their profits. We find out more about their growth factors and differentiators for success.

Staying profitable was no easy task in the dire financial climate. Yet a number of companies were able to increase their profit in 2009. We take a look at the Top 10 Companies for Profit Growth to see how they managed to boost profits in lean times.

Most companies scaled back their profit growth projections due to the financial slowdown. While no Security 50 manufacturer lowered their profit goals, the average profit loss was 4.2 percent in 2009.

Eight of the Top 10 profit growers were in video surveillance, including network video providers Mobotix, IndigoVision, Milestone Systems and Axis Communications. Asia had a strong showing, with Dahua Technology, Hikvision Digital Technology, Hi Sharp Electronics and C-Pro Electronics boosting profit margins. The remaining two companies were biometric providers L-1 Identity Systems and RCG, with all 10 companies posting double-digit profit growth.

As the Security 50 participants averaged profit losses, Mobotix's profit growth of 32.9 percent is all the more astonishing, leading the Top 10 Companies for Profit Growth. “The gross profit margin increased due to the positive effects of economy of scale,” said Ralf Hinkel, CEO of Mobotix, in a prepared statement. Positive effects included increased dome camera sales, which rose 58.8 percent and improved profitability.

IndigoVision increased its profits by 29.8 percent, with a gross margin of 64.1 percent. “Gross margins were lower than last year, reflecting a change in sales mix and greater volumes, but the contribution from gross margin grew 30 percent to a record US$26.1 million,” the company said in a prepared statement. Its lower margins were partly due to increased operating costs, which were 24 percent higher at $21 million.

Newcomer Milestone's profit growth of 18.7 percent was nothing to sneeze at, either. “In the U.S., we are doing particularly well in education, transportation, city surveillance and industrial processes; retail is slowly coming back as well,” said Eric Fullerton, Chief Sales and Marketing Officer, Milestone Systems. “In Asia and Europe, government stimulus packages are put to use in major infrastructure projects that require constant monitoring — and in large quantities of surveillance cameras.”

For L-1 Identity Solutions, its gross margin fell slightly to 29.4 percent in 2009, from 30 percent. “The decrease was due to changes in the revenue mix resulting from lower biometric revenues and higher revenues from secure credentialing and services,” L-1 said in a prepared statement.

Innovation
The industry is headed in two directions: solutions for vertical-specific applications and low-end products. For this year's profit growers, solutions were clearly the way forward.

Adding solutions in HD and outdoor cameras helped Axis stay profitable in 2009. It commits 13 percent of its revenue to R&D, with thermal imaging being the company's next differentiator. “New products — some 20 in 2009 — definitely contributed to our growth,” said Ray Mauritsson, President of Axis Communications. “In terms of vendor alliances, partner programs such as ONVIF also contributed to growth and profit.”

Mobotix is equally committed to product development, with a staff of 53 employees and an R&D budget worth $5.5 million in 2009. It switched to a new processor last year that doubled computing power for four camera lines, the company said in a prepared statement. However, this required mechanically adjusting products and delaying new launches, with all production taking place in Germany.

RCG's complete lineup of RFID and biometrics for access control helped solidify its margin. “RCG invests significantly in R&D every year,” said Dato' Lee Boon Han, CEO of RCG. “Our R&D team designs innovative products and solutions to meet various market demands. With our business operating for 11 years, we offer a diverse portfolio of products and services that sets RCG apart from its competitors, which is key to the company's growth and ongoing success.”

Education
For software provider Milestone Systems, training is essential for channel partners. Without training, installers and users will not reap the full benefits of a management solution. “For cost and efficiency reasons, we started working with Connex International for specialized training in the U.S. in 2009, and this year we decided to invest some money in the company, for better presales and product training services worldwide at a lower cost to us,” Fullerton said.

Milestone previously conducted the training in-house, but found Connex could do the same much more quickly in the U.S. “We charge distributors and system integrators for these training sessions, but they get to take away and sell complimentary software licenses that are easily worth two times what they pay for,” Fullerton said. “Connex offers at least eight hands-on labs and classes per week, and with each class serving eight to 12 trainees, thousands can be certified in a year — much more cost-effectively than what we can do ourselves.”

Find More 2010 Security 50 Articles :

Asia Weathers the Storm

Growing Profits in Lean Times Part Ⅱ

Bucking the Downward Trend: Top 10 Revenue Growers of 2009

● Security 50's Top Performers Rise Above the Fray Part Ⅱ

● Security 50's Top Performers Rise Above the Fray Part Ⅰ

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