Slept on this one overnight. I watched an interview and read the...

Slept on this one overnight.

I watched an interview and read the investor presentation along with the Japanese videos from zen-nikkei.

Thoughts summed up (with assumptions):

Problems for sales

1. There are too many false positives with the Icetana system for an organisation to use the system without a dedicated operator (vast majority of the surveillance market). With the Icetana system current level of accuracy they would be asking these organisations to budget to provide additional resource to monitor systems real-time (the system was noted as being an 'attention' system not an 'alert' system)
2. A lot of organisations with surveillance systems (regional councils, councils, hospitals) are budget constrained organisations. Surveillance real-time most likely does not sit strongly in their value chain. This makes any significant investment into changing their operational model unlikely (a case could be made for hospitals though - patients falling out of beds etc.) Budget is allocated to support the value chain
3. More often than not surveillance systems value add is as 'deterrent' system to discourage property damage or other negative behaviours. Icetana is trying to change the operational model and where these systems sit in the value chain

Possible opportunity

1. A significant cost for organisations is the connectivity of surveillance systems - i.e. paying for dedicated fibre links, construction etc. For greenfield installs, if the Icetana system reduced the requirements in this area it could offer a significant cost saving benefit. If the Icetana system could do analysis on the edge nodes where the cameras are and only transmit over 4G or 5G what is of interest it could provide real value to budget constrained organisations when looking at greenfield deployments or extensions of current surveillance networks.

• I assume the architecture doesn't currently support this approach of analysis at the edge nodes (I could be wrong)

Investment opportunity

I guess Icetana is a company to watch, but with only 12,000 cameras on the system across four continents they have not disrupted the surveillance sector with their current offering. Therefore, personally I would be watching for either of these two triggers before investing:

• If they can get the system to work with limited false positives as an alert system (versus requiring dedicated operators) they can reap benefit; or
• If they can architect their system to remove the system requirement for organisations to pay for dedicated fibre connections (which are incredibly expensive when viewed against the business case benefits for surveillance system projects) they would have disrupted the cost model and again could reap benefits in sales. If either of these two triggers seem likely I would be

Until then, I believe they will have sales in line with surveillance system usage growth while holding the risk of being disrupted by an alternative deep learning approach to surveillance that provides additional benefits over what Icetana can currently offer to customers.

As a side note, verticals such as prisons seem to be ideal - where dedicated operators are available. That market alone is probably big enough to give good sales to a company of this market cap size.