{"id":1361,"date":"2010-12-27T08:55:46","date_gmt":"2010-12-27T13:55:46","guid":{"rendered":"http:\/\/www.cusjc.ca\/ottawainsight\/?p=1361"},"modified":"2017-11-19T17:30:34","modified_gmt":"2017-11-19T22:30:34","slug":"march-in-search-of-steady-pace","status":"publish","type":"post","link":"http:\/\/www.cusjc.ca\/ottawainsight\/?p=1361","title":{"rendered":"March in search of steady pace"},"content":{"rendered":"

The headline puns practically wrote themselves.<\/span><\/p>\n

\u201cKanata firm March-ing backward,\u201d declared The Ottawa Citizen one year ago.\u00a0 Ottawa-based March Networks Corp., a maker of video surveillance systems, had just posted its second quarter results.\u00a0 Revenues were poor; March had stopped predicting sales and earnings in its grim reports.<\/p>\n

Quarter after quarter of missed expectations were even more disappointing in the face of March\u2019s early successes.\u00a0 Within a year of its 2005 IPO, March stock was worth almost $40 \u2013 more than three times its original price of $12.\u00a0 But March relied too heavily on continued sales to Wal-Mart, its biggest customer, and when Wal-Mart turned to other suppliers for its surveillance needs, March and its investors (including the Canadian government) paid the price.<\/p>\n

March\u2019s share price plummeted until 2009, when it evened out in the $4 range.\u00a0 But instead of meeting a bankrupt end, March survived by restructuring, cutting costs and wages, and falling back on a strong cash reserve.<\/p>\n

A SLOW RECOVERY<\/strong><\/p>\n

Now, March can boast two consecutive quarters of profitability.\u00a0 But if share prices are any indication, investors are not yet ready to believe that March is marching in the right direction.<\/p>\n

\u201cThe street takes a \u2018wait and see\u2019 stance,\u201d said Simon Gwatkin, head of investor relations for March.\u00a0 \u201cTwo or three quarters of profitability would be a good thing [for March\u2019s share price].\u201d<\/p>\n

At present, industry analysts estimate that IP video systems comprise about one-fifth of global video system sales, meaning there is plenty of room to grow.<\/span><\/p>\n

Gwatkin noted that Canadians are traditionally conservative investors, and expressed his belief that investors will wait for a catalyst before moving on March\u2019s stock.<\/p>\n

March may provide that catalyst if can successfully grow its IP video products.\u00a0 IP (internet protocol) video is the next trend in CCTV surveillance.\u00a0 By sending digital video signals through network cables or wireless protocols, the resulting high-quality footage can be stored, viewed and analyzed on a central server.\u00a0 For organizations looking to monitor many cameras simultaneously, IP video can be a much more cost-effective and user-friendly solution than traditional analog cameras transmitting video over old-style coaxial cables.\u00a0 At present, industry analysts estimate that IP video systems comprise about one-fifth of global video system sales, meaning there is plenty of room to grow.<\/p>\n

March entered the IP video market when it acquired Italian company Cieffe in 2008.\u00a0 Analysts initially expressed some concern about March\u2019s IP video systems; they could not support large camera networks and were incompatible with third-party cameras. However, March\u2019s new Command platform has addressed these shortcomings, helping to drive up earnings expectations.<\/p>\n

DIFFERENT ANALYSES<\/strong><\/p>\n

\u201cIn our view [Command] was essential for the company to stand a good chance of being able to compete for much larger deals versus staying in the comfortable spot of selling networked DVRs to banks,\u201d wrote TD Newcrest analyst Chris Umistowski in a November 24 report.<\/p>\n

Thanos Moschopoulos, an analyst with BMO Nesbitt Burns, is more circumspect.<\/p>\n

\u201cIt seems like a good product, but it\u2019s a competitive market,\u201d said Moschopoulos.\u00a0 \u201cThe challenge for March is that historically all their customers have bought their software as part of a complete solution.\u00a0 The deals have been led by March\u2019s hardware.\u00a0 The question is, can they start getting traction with the software-based deployments, and we\u2019ll have to wait and see.\u201d<\/p>\n

Wal-Mart remains one of March\u2019s leading customers, representing a quarter of revenues in the most recent fiscal quarter.<\/span><\/p>\n

March\u2019s future success will depend on its ability to sell IP video systems to clients in its four key sectors: retail, banking, transportation, and commercial\/industrial (which includes the public sector).\u00a0 As the global economy recovers and retailers, banks, and the public sector seek to upgrade aging surveillance systems, March will have to offer a cost-effective, flexible, and innovative product to distinguish itself from much larger competitors such as Tyco Fire and Security, Honeywell Security Group, and Bosch Security Systems.<\/p>\n

March\u2019s focus on the transportation market may pay off in the future, as many public transportation systems are just beginning to install video surveillance systems to address public safety concerns and the threat of terrorism.\u00a0 Mobile camera installations require a great deal of customization, however, and any new transportation deals will likely require significant lead time before generating revenue.<\/p>\n

Wal-Mart remains one of March\u2019s leading customers, representing a quarter of revenues in the most recent fiscal quarter.\u00a0 Other key clients include Wabtec (a supplier of railway products), the Toronto Transit Commission, Bombardier, and the Maryland Transit Authority.\u00a0 Earlier this year, March signed a $7 million contract with a large, unnamed American bank.\u00a0 Dunkin\u2019 Donuts may become another significant source of revenue; the company is encouraging its franchise owners to install March systems in their stores.<\/p>\n

UNEVEN REVENUE<\/span><\/strong><\/p>\n

Even with large customers and impending product rollouts, the nature of the video surveillance equipment business makes it difficult to maintain an even revenue flow.\u00a0 When March secures a customer, its balance sheet improves as the customer purchases the products needed to install a video surveillance system.\u00a0 But once the rollout is complete, revenue from that customer falls dramatically.<\/p>\n

While uneven revenue streams can wreak havoc on March\u2019s stock price, some analysts believe it opens new avenues of opportunity for savvy investors.<\/p>\n

\u201cOver time, customers come back for more when they build new stores, bank branches, busses, or replace old equipment,\u201d wrote TD Newcrest\u2019s Umiastowski in his a report.\u00a0 \u201cLumpiness means stock price volatility.\u00a0 Right now, investors are able to take advantage of a down cycle.\u201d<\/p>\n

In its most recent quarterly report, March posted net earnings of $284,000 and revenues of $28 million for the second quarter of fiscal 2011, ending on October 31.\u00a0 March stock closed at $4.17 today.<\/p>\n","protected":false},"excerpt":{"rendered":"

The headline puns practically wrote themselves. \u201cKanata firm March-ing backward,\u201d declared The Ottawa Citizen one year ago.\u00a0 Ottawa-based March Networks<\/p>\n","protected":false},"author":142,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[211],"class_list":["post-1361","post","type-post","status-publish","format-standard","hentry","category-corporate-profiles-2010","tag-sol-israel"],"_links":{"self":[{"href":"http:\/\/www.cusjc.ca\/ottawainsight\/index.php?rest_route=\/wp\/v2\/posts\/1361","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/www.cusjc.ca\/ottawainsight\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.cusjc.ca\/ottawainsight\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.cusjc.ca\/ottawainsight\/index.php?rest_route=\/wp\/v2\/users\/142"}],"replies":[{"embeddable":true,"href":"http:\/\/www.cusjc.ca\/ottawainsight\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1361"}],"version-history":[{"count":13,"href":"http:\/\/www.cusjc.ca\/ottawainsight\/index.php?rest_route=\/wp\/v2\/posts\/1361\/revisions"}],"predecessor-version":[{"id":4320,"href":"http:\/\/www.cusjc.ca\/ottawainsight\/index.php?rest_route=\/wp\/v2\/posts\/1361\/revisions\/4320"}],"wp:attachment":[{"href":"http:\/\/www.cusjc.ca\/ottawainsight\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1361"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.cusjc.ca\/ottawainsight\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1361"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.cusjc.ca\/ottawainsight\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1361"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}