Axis' performance is outstanding and nothing seems to slow down the progress. The technology shift, from analogue to digital surveillance solutions has just begun. According to IMS Research, an independent market research company, by the beginning of 2011 the sales of network cameras will outperform the sales of analogue units. The same source reveals an expected increase within the network video market by more than 40 per cent on a yearly basis. All the above considered, Axis seems to hold a golden position within the security market.

What is the main reason for the world leading position held by Axis in the network camera market?

- We introduced the world's first network camera already back in 1996 when we released the first unit into the market place. At first it didn't attract the security market, so it took some years before it was treated as a serious alternative to analogue cameras. The main reason why we have managed to keep our leading position is that we have released new products at a very fast rate. Of great importance is also the fact that we have also developed very close relations with our system integrators all over the world.

Being the innovator of network cameras, was it ever tempting to seek a patent for the technology behind it?

- We have never believed that it is a good idea to patent a concept in order to keep an advantage in the market, in a similar way to some companies in the pharmaceutical industry, when they exclude their competition from an innovation for a period of 12 years for example. Our patent strategy has instead been focused on patenting important parts of our solutions with a defensive purpose, to avoid being sued by other companies.

- Furthermore, it's quite difficult to get general patents approved, such as the network camera.

Do you mean that Axis would have been in a worse position if you had been the only player in the network camera market?

- Yes, probably, we don't believe that we could have turned a whole market ourselves. In fact, I actually welcomed our competitors during 2003 and 2004, when Panasonic, Sony and Bosch started to launch network cameras, as it improved the pace of the technology shift. It would have been much harder if we had had a strong patent preventing any competition whatsoever, they wouldn't have had any reasons to enter the market.

Do you welcome competitors today as well?

- What I hope will happened is that the larger video surveillance companies will abandon their analogue range of products in favour for the IP-based ones, for example Bosch and Panasonic. If you visit a typical security exhibition today you most probably will see these company's latest IP-cameras. However, if you look at their sales organisations you will find another pattern, emphasising analogue solutions over IP-based ones. This is true mostly because the installers and system integrators have used analogue cameras for such a long time, and they do not see any reason to adopt the new technology. The technology shift would have gone much faster if these companies had received one single message.

Which customer sectors have the largest potential for Axis?

- Currently, the most interest is coming from the retail business and the transport sector. Both are big verticals with a big base of installed cameras of the traditional sort. Also, these two verticals are the most active ones right now, which makes them most interesting in a short-term perspective.

- We also see increased activity in the public surveillance sector. However, it's somewhat adjacent to the transport sector.

Which geographical markets are increasing the most for Axis now?

- Video growth is very similar for us in all geographical markets. There are a few percentage points differentiating between our main markets, which are EMEA, USA and Asia. If I'm to highlight any of those, it would be the USA that has had a slightly stronger growth over the last three-four quarters.

- If you are looking for some substantial growth difference, you should look at countries that aren't very developed in terms of video surveillance coverage. There you can find really high growth percentages as they don't have much video surveillance in the starting position, but then we are leaving the scope of larger regions, of course.

How do you feel about the low-price competition from Asia?

- There are some 250 different network camera manufacturers, so of course there is competition. But if you look at the more important security installations, the biggest competitors are Bosch and Panasonic. The end customer isn't only looking at the price-tag, but also at the brand's continuity and quality. This makes it hard for the low-price newcomers to compete for the larger projects, so professional security installations do not suffer from any direct price pressure from the low-price market.

- We have an ongoing project called STS, in which we try to reach consumers and smaller businesses through telecom-operators. With STS we can see that the price pressure is much more evident, however, these types of projects are still in the initial stages, but eventually this market will see more competition from low-price manufacturers.

Axis recently opened a sales office in India, what are your growth expectations for India?

- Big expectations, it's a huge market with an enormous potential. India is also undergoing many big investments in the infrastructure that are of interest to us. Furthermore, the retail market is making great progress with big international chains establishing themselves.

- But I also want to be somewhat cautious as India is a new market to us. We aren't totally sure how the Indian markets
work yet, nevertheless, in a long-term perspective I'm sure that India will be a very important market to us.

Do you have any plans for further geographical expansion in the near future?

- The most important thing happening now is that we are increasing our presence in the markets that we are already active in. For example, some years ago in the USA we were only established with one office in Boston, and a smaller branch on the west coast. Today we have a sales organisation that is spread out over all of the country. You can see the same pattern in all our other active markets, more local presence.

- Regarding totally new markets I should mention that we are looking at South America, currently we don't have any offices there. Russia and East Europe are at present handled by our head office, but we will probably be locally represented there as well.

Which are your main competitors?

- Panasonic, Sony and Bosch. I can also add Pelco to that, as being a major player within the analogue market, but they are hard to say much about at this point as they recently were acquired by Schneider Electric, a system integrator.

What separates Axis from Panasonic, Sony and Bosch?

-The Japanese competitors, Sony and Panasonic, have a strong offering on the camera side, but a somewhat weaker range when it comes to video servers. When speaking about Axis the cameras are often the focus of the discussion, but important to mention is also our range of video servers, especially because of the big installation base of analogue products.

- Consequently, Axis' advantage lies in that we are strong on both cameras and video servers and therefore ready for installations covering both old and new cameras.

- Against Bosch it's the other way around. Bosch acquired the video server company VCS some years ago. Against Bosch we therefore have the advantage of having a somewhat broader offering.

What is Axis' contribution to optimise the growth rate of the network camera market? What more can be done to hurry the technology shift?

- Our method is to provide education to the system integrators, in which we describe the advantages of network cameras as broadly as possible. We are actually working very tightly with our system integrators, so one possibility would be to address the end users to a bigger extent. That would also be much more of a challenge considering that they are so many more in numbers.

- If you make some mathematical calculations and use the approximate figures that are available today, which is a penetration of about 15 percent, a growth rate of network video of 40 percent and a growth rate for the whole CCTV market of 10 percent. All these numbers taken together means that when we get to a penetration of 20 percent there is barely any growth left for analogue cameras. That could be a trigger for companies like Bosch and Panasonic to fully abandon the analogue cameras for the network ones.

Can you see any bigger trends when it comes to security versus personal integrity?

- In terms of legislation I can't see that much has happened recently. However, I believe that the attitude towards video surveillance has moved into a better stance. The attitude towards accepting video surveillance is getting softer. A recent example of that is the installation of Axis cameras in Stockholm's subway, in which the response has been generally good.

- I believe that some changes can be found in the legislative area, especially in the USA. One recent example is a system in which local pharmacies are required to have video surveillance to cover the transfer of drugs from the pharmacist to the customer. That kind of law can of course contribute to a positive outcome for us, but I wouldn't say that there is a general and global deregulation going on.

Is a national catastrophe required for a country to fully understand the benefits of video surveillance? Have violent crime or terrorist acts any importance for the attitude towards video surveillance?
- I believe so, there are a lot of examples of countries that have had terrorism problems in which you can see that video surveillance is more well penetrated as compared to more fortunate countries.

- Looking at Sweden and the murder of foreign Minister Anna Lindh in 2003 I've got a feeling that the assassination made people more accepting towards being recorded on camera in a public environment. I remember that many were shocked that there was not any better video footage available after the murder, which probably would have been the case with a more updated surveillance system. So yes, incidents do increase the progress of the surveillance camera market.

The video recordings of Anna Lind's assassin, when he left the crime seen, came from a surveillance system that was not installed according to the Swedish law. However, the recordings were very important for the police in the crime investigation that finally led to the identification and arrest of the assassin, who was sentenced to life in prison. How do you, personally, look at the law restriction that some countries have regarding video surveillance in order to protect the personal integrity?

- Privately, I can't see the difference of someone watching me in a public environment as compared to being observed by a camera. Where problems can occur is with the use of the recorded material. I think the UK has an accurate approach in this area, restricting how recorded material can be used and not how many cameras that can be deployed.

Axis business expansion is impressive over the last few years. Are there any risks in growing so big so fast?

- Yes there are. The challenge is the speed of recruiting; we are recruiting on a full front. It's a big challenge management wise, but also when it comes to ensuring that the company culture is kept intact. That is the big challenge and it's really marked. It takes energy from managers and the HR-department.

Do you have any plans to outsource any parts of your business?
- Not outsourcing in the true sense of the word. We have always worked more or less with consultants. We not only use consultant firms to make sure that we manage production in the best way, but also for simpler forms of R&D where we feel that we don't need to take part during the whole process. We are always open to new solutions, but firmly believe that we should have a central core of people to ensure the quality and innovation we aim for. To have all engineers at one site is important for the height of innovation, if not the risk is that you can get too narrow in your specific niche, rather than thinking in terms of a finished solution. This concept becomes even more important the more intelligence we build into the cameras.

Being listed on the Stockholm Stock Exchange Market, how much does this affect Axis and the decisions that you make as a CEO of the company?
- I'm not led by the stock price. Our larger shareholders see their possession as a long-term prospect. They are focused on making sure that we have good strategies to ensure good profits and high growth rate in the future. But naturally it is nice that the stock has experienced this good growth over recent years, it reflects to some extent that Axis is performing well.

Would you have the strength to maintain your high R&D investments (15 percent of revenue) and high speed of product launches if the network camera market was affected by sinking prices?

- That depends on with what magnitude such an event would occur. If we look at Axis' history we can see that the investment in R&D has been between 15 and 18 percent. We have always believed that R&D is the key to finding new products, trends and innovations. What has happened lately is that we haven't been able to keep the R&D investments as high as before, because of the fact that we have grown faster than we have managed to recruit. Simply put, it's hard to recruit in the tempo we are growing revenue-wise right now.

- In the short perspective we have good profitability and good gross margins, so there is no immediate threat that forces us to cut back on the R&D.

There is some tendency among manufacturers to communicate more directly with end-customers, and sometimes even sell to them. What is your position on that?

- To go that way would be exactly contrary to our philosophy. We are firm believers in the value that is created when we build loyalty in our sales channels. Chances are high that we would loose our competitive power if we started to go away from this principle.

- This position is not maintained just to be sociable with our sales channels, but rather that it makes our business model scalable, making it easier to grow fast. If we were to handle direct sales ourselves we would be in trouble as we would need to recruit so heavily to catch the growth. Today our selling works a little bit according to the "train the trainer"-concept. It means that we have the potential to grow big very fast, without the direct need to recruit. We are recruiting anyhow, but that is more to fortify our position. Much of the sales are managed through our partners. Our current challenge lies in the product supply flow.