DVTel Acquires ioimage: Deal Debated

IP Video Surveillance provider DVTel has acquired video analytics specialtist ioimage for an estimated $80 M USD in a stock transaction (based on future benchmarks). This is being reported by multiple Israeli newspapers and confirmed by sources close to the deal. These reports claim that this is a 400% return on $20 million invested in ioimage. Also see the official DVTel announcement (though it adds no material details).

In terms of the transaction, as a stock only deal between two private companies, it raises questions about the meaning of the valuation. The valuation is important for the greater video surveillance market as this deal will be used as a benchmark for video analytics as a business and technology.

Background of the Companies and Market

ioimage is widely considered to be one of the leading video analytic providers with the most publicly announced video analytics deployments and a strong focus on the security market. DVTel is one of the larger IP Video surveillance providers focused on providing integrated solutions of VMS, cameras, access control, etc.

The video analytics market is hotly debated with increasing industry dissatisfaction over the past few years.  We have tracked this in our video analytic market survey and analyzed this in our intelligent video state of the market presentation.

What Does this Deal Say About the Video Analytics Market?

We have reservations about assessing the impact of this deal - primarily from questions around the valuation. If it was $80M USD cash or stock from a large public company, this would clearly be a success and a bullish sign for the market. However, as DVTel is itself a private company (and a relatively small one at that), we think that the $80 M valuation needs to be carefully considered as a metric for assessing the market.

Fit Between the Companies

The fit between DvTel and ioimage makes sense. They both target the high end security market who generally have large scale deployments with critical security needs. This also fits in with DvTel's long term strategy of providing integrated solutions - all from DVTel.

This does raises questions about 3rd party support. ioimage is supported by a number of 3rd party VMSes. DVTel supports a number of video analytic systems. While they may continue to do so, their commitment to these existing partnerships is likely to diminish.

Future for the Video Analytics Market

We do not believe this changes the long term outlook for the video analytics market. Indeed, if one of the biggest video analytics companies is being bought out by a relatively small company, what does this say for the many smaller video analytics companies? Or for the intelligent video companies (such as 3VR, Cernium, ObjectVideo) with $30 M or greater investment? What is their exit strategy?

This deal further shows the broad trend of bundling video analytics with cameras and VMS systems. However, we think this is more of a reflection of general market failure for video analytics than a strong inherent strategy (premium members may read our analysis of the problems with bundling and failure to meet investor expectations).

We do believe this signals a modest beginning of the end for the video analytics "1.0" market that arose in the early 2000s.

What Do You Think?

Good news? Bad news? Agree? Disagree?