March Networks shifting to video analytics

March Networks Corp. is in the eye of the video storm, and like many companies is realizing that there is more value in application-based analytics than in commodity-based hardware. This shift can't happen fast enough for the Terry Matthews company - which is losing money and laying off workers."Top line growth has been good," says Thanos Moschopoulos, an analyst with BMO Nesbit Burns. "But right now the company is not profitable, and it won't be for the next couple of quarters."Ottawa-based March reported record sales for its video surveillance gear in its latest quarter, which ended in July, but had net losses of $2.4 million and is laying off about 8% of its workforce.Not surprisingly Peter Wilenius, VP investor relations and corporate development for March, is focusing on the positive."We've recently expanded our vertical market focus," he tells Network Letter. "Traditionally, our core vertical market was the tier-one financial institutions in North America. RBC in Canada deployed our equipment, as did Wachovia in the US. We landed six of the top US banks and another three in Mexico. Then we went after retail. Why? Because 35% to 50% of all inventory shrinkage is employee theft, and half of that is right at PoS."March, which has 250 employees in total, bought Cieffe S.p.A earlier this year. Based in Milan, Italy, Cieffe develops IP video surveillance solutions, and has had success in financial institutions, airports, the public sector, and with industrial clients. Overall, the acquisition and investments on encoder, IP camera, and software-based solutions, are beginning to pay off."It's helped as we go after large enterprise customers," says Wilenius. "The video business is a big market. If we include both the IP and the analog side it is $8 billion globally and growing at 8-10% a year."Dushan Batrovic, an analyst with Canaccord Adams in Toronto, says that in the past March was overly reliant on its own digital video recorder system. Opening up to other hardware systems has brought it more deals, but the market remains competitive."Now they can run their video surveillance off of a Dell or IBM server," he says. "This is where the industry is going. But the challenge they are facing right now is that even if their software does well, the rest or the proprietary hardware business is being heavily commodified, and their gross margins are way down."March received a jolt in January, 2007, when its biggest customer, Wal-Mart, pulled back and started buying from Verint Systems Inc. Why? One theory is that March's products and platform were not ideally suited for customers with a large number of cameras per site, though it is also true that Wal-Mart was pulling back from over-dependency on one vendor."They lost the business in part because Wal-Mart wanted a more modular solution than March had at that time," says Moschopoulos. "March was more focussed on a solution for a lot of sites with a few cameras at each, as opposed to a smaller number of sites with many cameras."At that time Wal-Mart represented over 50% of sales. The message: Don't be overly dependent on one customer, and don't expect to drive growth off of hardware.That said, the company is still pushing hardware, though it is well-integrated with its application-driven vision. A few weeks ago it announced that it had expanded its VideoSphere Intelligent Video Management portfolio to include the MegaPX 720p Camera. As well, the VideoSphere Intelligent Video Analytics suite has seen enhancements that expand behavioural analysis capabilities."Video analytics is a hot topic in the industry," says Wilenius. "An example would be motion triggers for recordings, detecting vehicle direction for alerts, or whether or not bags are left unattended."VideoSphere analytic applications not only alert organizations to potential threats, they can also provide insight into customer and employee behaviours, staffing levels, and other operational activities.In September March introduced a Software as a Service (SaaS) solution for retailers that offers advanced business intelligence for loss prevention and operations management. This is a subscription-based, hosted solution with PoS reporting and analysis to help reduce shrinkage. It's an interesting move, as it brings video analytics for retail into the SMB space, and allows March to be aggressive in working the next big trend to its advantage.

March Networks shifting to video analytics

News | 09/29/2008 1:48 pm EDT

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