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There are some very energetic blogs out there full of extremely pessimistic comments and anecdotal evidence about the seriousness of the downturn in the physical security industry and particularly the darling of the industry, IP Video. Last Friday they had a field day; now they had the killer evidence, the 2008 financial return of Axis Communications. This showed a dramatic downturn in their fortunes and confirmed, for these commentators, that if this was the best that could be achieved by one of the most successful companies in the business then we should now prepare for Armageddon. Some of these commentators had been pointing out 6 months ago that the forecasts of some of the market research companies were irresponsible, over optimistic and could never be achieved. They have been proven right. Mobotix AG a much smaller but nevertheless serious player in the IP Video business have just reported profitable high growth for the first half of fiscal year 2008 / 09, ending on December 31, 2008. In that quarter sales amounted to Euro 11.7m (previous year: Euro 8.4m) corresponding to a growth of about 40 percent compared with the same period of the previous year. By comparison Axis only achieved a 9% global growth in video from Q4 2007 to Q4 2008. Over the last 12 months, revenue did not grow much at all. This was a poor year relative to annual non stop 30%-40% annual growth over the last few years. So which do we believe most accurately indicates the future sizing of the market? Axis I believe. But from someone who has experienced at least three recessions, to achieve growth in a declining market shows good management. Navigating the problems of a rapid decline and loss of confidence in the world economy, will require a sure and steady hand on the tiller. Managing decline in demand requires successfully picking winning segments and betting on the buyers that will be long-term winners. John Authers, in his “The Long View” Financial Times column, writes of “the confusion that naturally follows a big market fall, and an economic situation for which there is no clear precedent.” He adds: “But it does imply that there are opportunities for those ready to exploit that confusion.”

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