President's message

Fantastic growth over the past year
 

2010 was a successful year for Axis. We advanced our position to second place among suppliers of surveillance cameras and strengthened our leading position as a network video supplier on the global market. Through a high release rate of new products which were well-received by the market and advancement of our partnership network, we have accelerated the technology shift so that network video products are being installed to a greater extent in security solutions, optimizing customers’ business processes. This resulted in sales growth in local currencies of 37 percent.

The interest for network video products is continuing to rise and these products currently account for approximately 30 percent of new surveillance camera sales globally. Advantages such as high image quality, the simplicity of installing the products as well as the possibility of integrating with other systems are some of the contributory factors behind the increased interest.

According to the market research institute, IMS, Axis has advanced its position to second place among suppliers of surveillance cameras (including analog and digital solutions). Axis retains its leading market position within the network cameras category.

Net sales for the year

Sales for the year came in at SEK 2,933 M (2,301), which signified growth of 28 percent in 2010. Despite a high rate of expansion with 140 new employees and a high level of activity on the market, we have maintained good cost control and the operating profit amounted to SEK 415 M, giving an operating margin of 14.1 percent.

At the start of the year, the gross margin was impacted by negative currency effects and certain strategic price reductions as a result of the expanded product portfolio. We presented a gross margin of 50.7 percent for the full-year.

The changes in foreign exchange rates compared to the preceding year have had a considerable impact, particularly on sales. With unchanged exchange rates, net sales would have amounted to SEK 3,142 M and operating profit to SEK 494 M.

Global growth

We report the operations in three regions EMEA (Europe, Middle East and Africa), Americas (North and South America) and Asia. Axis’ sales trend has been positive during the year in all regions. A general increase in interest for security installations and in the digital technology, which offers a number of advantages such as cost efficient installation and high image quality, contributed to the positive trend.

The Americas region reported sales of SEK 1,373 M (1,085), corresponding to growth of 26 percent. The Americas region has displayed very good growth during all quarters of the year. The shift from analog to digital is continuing and network products in security installations have become a more natural choice in the North American market. The South American countries are at an early stage with regard to acceptance of and use of network video products.

The EMEA region reported sales of SEK 1,260 M (1,001), corresponding to growth of 26 percent. The positive sales trend is explained by the stabilization of the economy during 2010, which facilitated investments in network video products. Some economic instability remains in the southern parts of the region, which impacted purchasing decisions regarding security installations.

Asia region accounts for 10 percent of sales and the region reported sales of SEK 300 M (214), representing growth of 40 percent. It is gratifying to see that our focused efforts to expand our workforce and establish a partnership network in Asia are now delivering this positive development with strong growth.

Axis’ three pillar strategy

Axis’ established strategy is built on three components; innovative network video products; a strong partnership network and global expansion.

Like in previous years, we have achieved a high release rate of innovative network video products and about thirty were introduced during the year. Focus has been on network video products which deliver HDTV quality material. The great interest in these products demonstrates the important driver that image quality represents in the shift from analog to digital security solutions. The image quality is an important factor in order for end users to choose to install a digital system instead of an analog one.

The cost is another important factor during installation of a security system. A study conducted by the LUSAX research group at Lund University showed that the costs of a digital system are lower than an analog, even in the case of smaller-scale installations. When we carried out a study in 2007, it showed that the installation cost of a network camera system was lower at 32 cameras, whereas today the installation is more cost efficient on installation of a system comprising 14 network cameras.

Proximity to the end users provides enhanced knowledge

During the year, we have advanced our partnership program and increased our presence globally. A survey among our partners showed that the choice of Axis as a supplier was largely based on the knowledge we possess and provide. In conjunction with our partners, we worked even closer to the end users in our chosen end customer segments. By participating in discussions with the end users, we gain a more in-depth understanding of how our products are used in different end customer segments.

Global company with local presence

We are present with Axis’ employees in more than 30 countries today, through partners in over 70 countries and through installed Axis’ products in more than 170 countries. During 2010, we have trained the market in the benefits of network video on more than 900 occasions, conducted approximately 430 classroom training sessions within the framework of Axis Communications Academy and have also had over 8,000 visitors at our web-based training courses.

Apart from expanding our partnership program, we have also recruited 140 new employees, evenly distributed between the headquarters in Lund, where we have research, development and staff functions, and our sales offices around the world.

Continued exciting development

We are in the midst of a technology shift, where as market leader, we are driving the market from analog to digital technology. In order to retain our market-leading position, we will continue our aggressive strategy featuring the release of innovative products, development of our partnership network as well as global expansion.

We operate on an exciting market where new sales of network video products in 2014 are expected to amount to 50 percent of the overall video surveillance market of USD 14.5 billion. This implies a market for network video products of USD* 7.3 billion, corresponding to expected market growth of 25–30 percent in the next few years.

At Axis, we will continue to operate on this expanding market in order to maintain our market-leading position within network video and advance our position as a supplier of digital security equipment. With the market’s broadest product portfolio, an increased interest from partners and an expanding global organization with more than 900 professional employees, we are well-equipped to meet future opportunities and challenges.

Ray Mauritsson
President

* The 2010 edition of IMS Research’s report “The World Market for CCTV & Video Surveillance Equipment”.

“2010 was a year of fantastic growth which I and all the employees are very happy about and proud.”