March Networks walks into red again

Ottawa’s March Networks has posted another annual $6.5 million loss, in part because of slumping world spending. But the manufacturer of digital video surveillance systems sees tentative signs of a recovery that could make it profitable in the coming fiscal year.

The company said Thursday that for the fiscal year ending April 30 it pulled in a record $101 million in revenue, but didn’t meet its goal of returning to the black. However, in a conference call CEO Peter Strong said he is “optimistic but cautious” for March’s outlook over the next 12 months.

That optimism is built on slender threads.

Perhaps not unexpectedly, spending in the U.S. banking sector – one of the company’s key markets – was “paralyzed” in December and January, Strong told financial analysts. But “what we have seen in the last two months or so, some of those projects that had been locked up starting to loosen up a little bit, putting those projects back on the table again.”

On the other hand, he admitted there’s “a lack of long-term commitments.” For example, the company is hearing some customers tell his company they are determined to deploy a system, but won’t promise how many will be bought. He’s seeing similar signs among European and Middle Eastern and African commercial/industrial businesses, a new market March is pinning its hopes on. Organizations there had put plans on hold, but “we’re starting to see that activity come back again,” he said. “We’ve definitely seen a rebound in our pipeline of activity.”

He also said that U.S. economic stimulus spending on infrastructure has resulted in “signs of more ambitious plans to provide fully integrated solutions than maybe we had before.” The level of business activity in Asia in the first quarter has been “robust,” he added, citing a sale to a number of airports. It was not only the company’s first in the region, but also the first under a March-Sun Microsystems partnership that sees the companies assembling surveillance-server-storage bundles.

However, to underscore his caution, Strong – like many other CEOs these days – refused to predict the company’s revenue range for the fiscal year.

March’s main line is the VideoSphere IP surveillance system, which includes analytics offering a range of features tailored for varies industries including facial detection, queue length monitoring and wireless mobile capabilities.

In the fourth quarter the company lost $1.8 million, in part because North American revenue dropped six per cent.

For the fiscal year, revenue was $101 million, up from $94 million from the fiscal year ending April 30, 2008. Gross margin was up as well. However, the company had to absorb a restructuring cost of $2.6 million plus amortization costs of $3.8 million due to layoffs and the acquisition of Italy’s Cieffe S.p.A. As a result, the net loss of $6.5 million was virtually the same as the year before.

There was some good news, Strong said. Revenue from countries outside North America was up 63 per cent over the previous year. Latin American sales, for example, were up 22 per cent over the year before. Once dependent on a few customers, including Wal-Mart, for most of its revenue has diversified. Its top three customers now represent just under 30 per cent of revenue, down from 43 per cent in fiscal 2008. Among the goals for this fiscal year is “aggressive growth” in Europe, the Middle East, Africa and Asia, which will rely on new channel partner relationships, Strong said.

The chairman of publicly-traded March is entrepreneur Terry Matthews, who also is chair of Mitel Networks. He also sits on the boards of Bridgewater Systems Corp., Solace Systems Corp., CounterPath Corp. and Newport Networks Group plc.

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