The history of Axis. Entreprenuerial background. The way to define our first product. Before Axis. Our first product

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1 Entreprenuerial background The history of Axis a disruptive change in an industry going from analog to digital Martin Gren, Founder of Axis Communications AB > All my relatives are teachers > I decided to start my own company when I was 11 years old > During high school I was selling disco lights late 70 s and the disco age! The way to define our first product Before Axis > First idea was a control unit for color slide projectors > We saw a potential and a market > Good margins! > but the sales channels were locked > We financed ourselves with student loans and low costs > Initially we were consultants without receiving a salary > The idea was to become a product company > Our first company was founded in 1979 > Second company was established in 1983, AB Gren & Karlsson Firmware > and in 1984 Axis was founded by Martin Gren, Mikael Karlsson and Keith Bloodworth Our first product Defining the first product > We developed a plug-in board for a Swedish PC to attach it to IBM Mainframes > The IBM PC terminal market was saturated > but we realized the opportunity in printing! > The market is open > We meet Keith Bloodworth who has experience in the IBM printing market > Keith defines our business model as being always indirect sales > We realize our niche in being a company always loyal to our channel > We also make our products more distribution-friendly 1

2 Establishing the current AXIS in 1984 Axis extended eco-system sales model > Mikael s and my first real company was Gren & Karlsson Firmware > After we met Keith, the 3 of us founded Axis > The name comes from the IBM product areas TwinAX CoAX > We want to begin with an A to be first in listings > We all agreed on this name! Axis Distributor System Integrator ADP Consultant End user The first volume product Axis strategy on new products > We develop a working print servers > Using this and an already long established bank relation we get our first loan > The loan was based on a first customer order and internal testing by the bank > Verify that there is a market > Make sure there are openings in the channel > Build on standard components to learn the market quickly > Then design custom chips to have an edge > This model has worked in the establishment of all our business areas International expansion Continuing the geographic expansion > Our first subsidiary was in USA 1988 > Mikael moved to Japan in 1993 to set up an office > Hong Kong 1993 > Shanghai and Beijing 1994 (Beijing closed in 1996) > Singapore 1995 > France 1996 > Germany and England 1997 > Brazil 1996 (closed and moved to Miami in 1997) > Brazil 2009 > And many more! 2

3 Early global expansion Our first internal crisis HQ EMEA + Nordics/Baltics + Customer services > We grew organically and with strong geographical expansion Americas Canada Netherlands UK FR/BeLux Spain Russia DACH/CEE China Italy N. Asia HQ MENA Thailand Korea Japan HK/Taiwan/ Macau > 500% interest rate in Sweden in 1992 > A friendly bank helped us > Devaluing the Swedish currency is of great help Headquarters Regional headquarters Colombia India Malaysia SAP HQ Sales offices South America Configuration & Logistics Centers Chile South Pacific (Australia) Argentina South Africa First shift in business area Storage products > Initially we did IBM print servers > We saw the potential in networking and TCP/IP > We created an almost identical product for network printing > We learned that IBM and network printing are sold very differently and a long period of changing our channel begins > Established in > Our first product with embedded web server > Ray took over as division manager > We were world #1 in 1998 > The market for optical media sharing disappeared in 2001 On a business trip to Japan in 1994 Go for cameras in early 1996! > We see the camera market and realize it is all analog > We have an internal spirit to look for new areas > One of our engineers has an idea for video conferencing over internet > By using standard components we can get going > The technology is good enough for remote monitoring, not CCTV > We develop a working prototype > We realize the market is all analog and has to be digital one day > We visit trade shows > We see our channel strength > Finally, we realize standard first, ASIC then 3

4 Atlanta, September 1996 One of our first camera customers > The AXIS NetEye 200 was launched at Interop Atlanta, September 18, 1996 > The world s first network camera > Performance 1 fps in CIF 1 frame every 17 s in 4CIF > More than 12,000 sold! Budget 5000 > Steve Wozniak, co-founder of Apple > Was in a car accident during a tech support call > No injuries and problem was solved Axis milestones 4 steps of network intelligence Network video Global 4 th phase Channel sales business model 1985 Network access to everything Fulfilling the connectivity vision The network video revolution Storage USA 3 rd phase Printers Asia/Japan 2 nd phase Opening the world of network connectivity Broadening operations World s first network camera Leading light of network video World s first thermal network camera IBM Protocol Converters Europe 1 st phase Axis vision since 1984: Everything can communicate over intelligent networks Recognized world leadership The three types of innovations > Network video pioneer and driving force Global #1 in network video and network cameras* Global #1 network camera since 1996 First launched video encoder in 1998 First t launched HDTV network camera in 2006 First t launched Thermal network camera in 2010 > Bring in a technology from a different industry Network Thermal Network Cameras > The ones you can plan Follow Moore s Law New standards that evolve Watch consumer electronics the main technology driver today > Truly new ideas Network cameras Simplify installation by power over Network Security as a Service *Source: IMS Research report, The world market for CCTV and Video Surveillance Equipment, 2009 edition 4

5 Thermal imaging a fantastic tool for surveillance Technology evolution > Detect objects 24/7, in total darkness, through different weather conditions and smoke > People detection for safety and security > A greener choice, no need for energy consuming floodlights > Great with video analytics > Complement to existing network cameras and products > Anonymous surveillance Detection without identification > Moore's law from 1965 is still valid! > Every 18 months you get twice as many transistors/performance for the same amount of money No exponential is forever but we can delay forever. Chip size reduction/functionality increase Let s validate Moore s Law times mpre function aliry19 50 times more performance within ten years > 14 years since 1996 > Moore s law means 10 years 50 times 3 times 18 months = 400 > 1996: 0.1 Mpix, 1 fps > 2010: HDTV, 30 fps > 2010: 600 times! Yes, Moore s Law is valid! IPO in 2000 Axis video sales > We invested in mobile internet during the dotcom boom > We needed more cash and made the IPO > Our goal was to keep the company private 5

6 Sales in the regions* Axis hiring (Q2) 47 % 43 % 10 % Americas EMEA Asia *Q The analog film and digital camera market The analog film and digital camera market Digital Digital Analog/film Analog/film The analog film and digital camera market The analog film and digital camera market Digital Digital Analog/film Analog/film 6

7 The Kodak Building in Järfälla Image quality > Axis has always had a superior image quality > We have now improved it further in new products > There is still a lot more that can be done The case for HD-TV and networked video We can make the shift go faster! > Analog video based 1940 standard Not even worldwide Analog video shut down in most countries > HTDV resolution Aspect ration(16:9) Full frame rate Color fidelity Standards based (SMPTE) > Networked video PoE Savings H.264 compression More In-house R&D Important focus of Axis openness 15% of revenue > Substantial R&D investment 24% increase in R&D spending 2009 Y-oY All R&D at one single location > Openness Standard d networks and IT equipment Founding member of ONVIF VAPIX Application Programming Interface AXIS Camera Application Platform > Innovation AXIS ARTPEC and ETRAX chipsets Many industry firsts > Quality Importance of our corporate culture > Value of a strong culture > Being a public company requires more external information than internal balance is important > Don t change business model and products at the same time! > Have a strong vision and an ambitious goal 7

8 TCO and scalability 1998 First video encoder First 100 camera system Network video lower cost +100 First 1000 camera system Network video lower cost +32 First 10,000 camera system Network video lower cost +25 Large retailer First 100,000 camera system ? partner r network Axis competenceleader worldwide open network video camera HDTV convergence easy installation megapixel Thank you! safe innovation environment protect leader image usability video encoder thermal global in ntelligent outdoor ease of use integration H.264 focus A German distributor Avoid venture capital! > Controlled by the founders with an external financing > The financer wanted to go for Neue Markt, 1999 > Company enters a DD phase > Hires a lot of staff on expectations and growth plan > Lose focus > The external VC goes bankrupt > Company does not get listed > Be certain on what you use it for! > VC Capital hates risk, doesn t encourage it > Know where the capital comes from and what it represents > If you can, have more than one investor > Make certain they are aligned in their interests and length of investment > Too much capital can kill a company The best capital is close to you! If you take in capital > FFF Friends, Fools and Family > They ask the basic questions which are often the best > They have a more realistic expectation than venture capitalists > They will push you for sell, sell, sell > Know and understand the legal stuff > Understand the terminology: Drag along, tag along and hurdle they will all affect you > Try to get a pay-to-play clause > Understand they way the capital works and why, time-frame, etc. 8

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