Looking beyond the 2012 ranks

Consensus among the physical, electronic security industry is that the marketplace out there is highly fragmented and support-intensive. Cream of the crop, by unbiased financial performance, is not easy to muster, let alone gathering a representative 50. In this feature, a&s looks into the 2012 Security 50 who survived and/or thrived, to highlight changes, trends and directions for the near future.

The 2012 Security 50 ranking was based on 2011 financial results. 2011 was supposed to be a “rebound” year, and yet not everyone passed with flying colors. Some gained momentum, sales and market share, while others continued their struggle to find the best approach to defying declining revenues.

Video surveillance, compared to other product groups, had fairly strong revenue growth with an average of 19.5 percent. Avigilon saw its revenue grow to US$59.1 million, up 86 percent from 2010; its gross profit also grew a whopping 89.7 percent. Asian manufacturers Hdpro and Vivotek have also scaled the ranking ladder. As a matter of fact, nine of the top 10 companies for revenue growth are dedicated providers of video surveillance solutions. Chinese manufacturer Tiandy Digital Technology made its debut in this year's ranking; this company is coming on strong with 50.1-percent and 60.6-percent growth in revenue and profit, respectively.

The average revenue growth for the access control manufacturers on the Security 50 ranking was a mere 0.5 percent. Access control giant Assa Abloy (Global Technologies division) clinches the spot as top player again with $826 million in revenue, up 14.8 percent from 2010. According to its financial report, demand for RFID devices rose sharply in 2011, as it upgraded its numerous customers' previously installed locks, which used a magnetic stripe card locking system, to more secure, flexible and user-friendly locks that employ RFID. SimonsVoss Technologies also performed well, growing 18.4 percent in 2011. Korean manufacturer Suprema posted considerable revenue growth, up 21.9 percent from 2010 to $36.4 million in 2011, while another Asian vendor RCG restructured and suffered.

In profit growth, the top 10 include IP video solutions providers Avigilon, Mobotix and Synectics, security and safety systems provider Napco Security Technologies, and Asian elite Hdpro, Tiandy, Hikvision Digital Technology, Dahua Technology, Kocom and Win4Net.

Fast Growing Companies
Last year was quite significant for Avigilon, Mobotix and Arecont Vision. Avigilon achieved 86-percent growth, the highest among the 2012 ranking. Mobotix grew 35.9 percent, and Arecont Vision rose 25 percent. All three are pioneers in multimegapixel cameras and are enjoying the growth phase of the network camera product life cycle.

Avigilon
“In November, we went public on the Toronto Stock Exchange,” said Keith Marett, VP of Marketing and Communications. “In less than a year, we doubled our ITO price. In this day and age, that's a significant achievement to be able to deliver those kinds of results to shareholders. In 2011, Avigilon was named the fastest growing software company in North America by Deloitte's Fast 500 ranking.”

Mobotix
“Mobotix is like Apple,” said Magnus Ekerot, CEO of Mobotix. “We have full control of what we want to be. Putting standards aside, we should think about end users; they should have the freedom with installations and no extra fees for buying management software. Why we do something different is for the sake of end users. We also think about how we can help systems integrators and distributors make money and keep the margin they should have.”

Arecont Vision
“When it comes to surveillance, pixels (resolution) are all that matters,” said Becky Zhou, VP of Sales for APAC. ”Think about how much area can be covered by a camera. For a VGA resolution camera, you get about 1,500 pixels per dollar. For a 10-megapixel camera, it is about 1,800 pixels per dollar. This is more cost-effective, and the ROI is better. The megapixel camera is right in the initial, high-growth phase of its product life cycle. We are expecting more growth in the near future.”

EU Results, Surprisingly Good
For European companies, the average revenue growth was 17.4 percent, which is roughly 6 percentage points higher than the year before. Despite the financial struggles in southern Europe, double-digit revenue growth was posted by Assa Abloy, Axis Communications, Geutebruck, Mobotix, Milestone Systems, Nedap, Safran Group, SimonsVoss, Synectics and TKH Group, averaging at 22.3 percent.

It is worth noting that the three German companies that made the 2012 ranking — SimonsVoss, Mobotix and Geutebruck — all enjoyed consistent, uninterrupted growth, thanks to their strong domestic market and high market presence, averaging an uptick of 23.7 percent.

Minor Bumps in APAC
The average revenue growth from APAC companies, on the other hand, had somewhat lost momentum. Over the past three years, Korean and Taiwanese companies, which used to be the security world's go-to-factories, have been facing stiff challenges brought on by global financial and economic crises and the rise of Chinese manufacturers. Hikvision and Dahua, apparent locomotives of Chinese security manufacturing, have intensified the price competition for their geographically adjacent opponents. Over the past three years, the 10 Korean companies have been able to hold on to and remain in the Security 50 ranking, while two of the nine Taiwanese companies dropped out of the ranking this year.

Interestingly, with an average 17.5-percent revenue increase, the ranking's Korean manufacturers outperformed the overall average growth of 14 percent. While Hdpro's exceptional 83.7 percent lifted the bloc's average, ITX Security's 11.7-percent dip was a clear indication that the days of siloed analog devices are numbered.

Taiwanese players, in contrast, did not enjoy a fruitful 2011, the average revenue growth was a mere 8.8 percent, and three out of the seven Taiwanese companies suffered revenue losses. Dynacolor, Yoko Technology and Everfocus Electronics reported 16.4 percent, 16 percent and 12.3 percent revenue losses, respectively. Vivotek and Geovision, on the contrary, represented a small number of Taiwanese companies who did well in 2011 and invested in IP-based and vertical-specific solutions, with revenue increases of 62.1 percent and 27 percent, respectively.

Despite the successes of Hikvision and Dahua, another prominent Chinese (Hong Kong) company, RCG, encountered a severe organizational and financial struggle, with a revenue decline of 54.2 percent. Average growth for Chinese companies also turned lukewarm in 2011, which might be an implication that the domestic market has slowed, and those looking to grow will need to figure out how to make their mark in the international market.

Warning Sign
The average gross profit margin from 2012 Security 50 was a humble 12.6 percent, a clear warning sign that the security industry is following in the footsteps of the IT industry in terms of ever-decreasing profits.

To stay profitable means to differentiate and stay unique. Mobotix enjoyed a 76.8-percent gross profit margin to lead the top 50, followed by Milestone Systems' 75.8 percent — these were just two stellar examples from many in terms of system architecture and channel distribution.