by: Taylor Cox, Benzinga Staff Writer
TASER International, Inc TASR on Wednesday announced an unprecedented move: The company will offer a one-year free trial of all its existing body camera products, full software suite and training support to every police agency in the United States.
The company will also be changing corporate identities from "Taser" to "Axon," with its stock ticker changing to AAXN effective April 6. In a telephone interview, CEO Rick Smith told Benzinga, "We believe body cameras can make a huge impact. That's why we are making them free to every police officer in America."
Smith said despite studies exhorting the benefits of body-worn cameras in policing, only about a fifth of American police have access to the devices. He offers a pair of possible explanations.
"It is somewhat inertia. Moving any organization forward takes time and energy," Smith said. Cost concerns also play a role.
"We are in an environment where there have been budget cuts," Smith said. "It is hard for agencies in some cases to envision launching new programs when they are struggling to fund the existing ones. So we looked at this and we said, 'Look, let's accelerate into the future and let’s cut out everything that stands in the way, and make these things available for free. Literally, there are no hidden strings attached here. You can test if for a year, if you decide it is not for you, you send us back the gear, we will send you your data. You can do this and never pay us a penny."
Taser's offer includes one Axon Body 2 camera for each sworn officer, digital evidence data storage view Evidence.com with 'Unlimited Pro' license, and docking station to securely upload footage. Additional information on how to sign up can be found at www.axon.com/offer.
What's In It For Taser?
Clearly though, there's more driving this than altruistic intent. After all, Smith has a duty to Taser shareholders and the company has already faced some questions as to when the company's dominant market position and top-line growth will flow through to the bottom line.
In that vein, Wednesday’s announcement should address pointed questions from sell-side analysts around the company's Q4 margin contraction and slight inventory build. "Some people were asking, 'Geez, why is Taser's inventory growing?' Here's your answer folks, we were building up for this," Smith said.
"As for our expense growth, we are hiring people so we have a greater professional service staff. We have been building capacity to be able to go out and support this. So a lot of those expenses already started showing up in Q4."
Asked whether a certain number of trials would have to convert to contracts in order to offset the cost of the promotion, Smith says it's a relatively low percentage. "The good news is, for every agency that comes into the program, we've now got a shot at winning a deal there."
The company will be holding a conference call Wednesday at 6 p.m. ET, to walk investors through “a high level financial model,” with the goal being to provide some reassurance that this makes sense and has been carefully considered. Smith believes the promotion can accelerate the market forward, ramp up revenue, and that it's worth the investment to do that.
Smith was quick to address the plan's need for strategic viability.
"Ultimately, it's got to work for us as well," he said. "The most powerful business models are the ones where you can really come up with a good win-win where you solve a big problem that matters a lot to your customers, and do it in a way where it makes sense for the company as well."
Smith explained, "The bet that we're making – and this is a big bet, we are going all in, putting all our chips on the table – we’re confident that for a police officer a body camera is like a smartphone to you and me. We never knew we needed it and then once we had it, we couldn’t imagine going through life without it."
To illustrate his point, Smith said every agency that has deployed Axon products in scale has continued. Referring to churn, or the proportion of service subscribers that discontinue their service within a given time, Smith said, "We haven't seen any major agency go backwards."
This Isn’t A ‘Weapons’ Company
Taser acknowledges the risk involved in a rebranding at this point.
“It is really hard to build a brand with 95 percent brand awareness,” Smith commented, “There is some risk to doing a name change like this when you have a brand that is well known.”
The issue became whether the company was becoming too synonymous with the physical product that gave it its start.
“Everybody, when you say taser, they immediately think of the electrical weapon," Smith said. "That can be somewhat limiting when we’re going in to talk to a customer about enterprise software, with no hardware component at all. They raise an eyebrow and go, 'Wait a minute, why are you here to talk to IT?'"
Smith said Taser was a great name when the company only had one product, but for about two years he's been planning the change to Axon. “We’ve been positioning ourselves as Taser Axon as we build up the Axon brand. Now, we’ll just be Axon, and Taser will be a product that relates to us with weapons.”
With its Evidence Management system continuing to evolve, he’ll seek to balance the growth in software-as-a-service with the bread-and-butter hardware segment.
“We’ve spent a lot of time (combining hardware and software)," Smith continued, "so I don’t think we want to turn our back on our hardware roots just because the software side is starting to scale. If we can do both, we can really create a lot of value.”
In A Space Lousy With Litigation, Cause For Concern?
It’s no secret the law enforcement body camera arena is fraught with lawsuits, with a couple of the more high-profile suits involving Taser.
Seattle-based VieVu, to whom Taser recently lost the coveted New York Police Department contract, is alleging Taser interfered with its contract negotiations in Phoenix. Taser, for its part, filed a consumer-fraud suit against VieVu in return, claiming VieVu used false claims to boost its score during the Phoenix procurement process.
Digital Ally, Inc DGLY, following a January 2016 U.S. Patent office decision upholding its patent for its auto-activation body camera technology, promptly initiated a patent infringement lawsuit against Taser. Though Taser has called the lawsuit frivolous (the same word the company has used to describe VieVu’s Phoenix suit) and notes it has won each of its previous patent lawsuits, WestPark Capital analyst Ishfaque Faruk recently speculated in the event Digital Ally wins the suit, Taser would either purchase the smaller company or license its technology, with neither outcome seen as having a relatively big impact on TASER.
In Smith’s view, the flurry of lawsuits over the past several years, some involving companies suing the same departments they purport to serve in order to keep them from going with competitor products, are nothing more than a distraction. “We actually encourage our customers, ‘You know what, go out and test other equipment.’ The fact that you’re a customer of ours doesn’t mean we own you.”
Asked about the potential for legal issues if police departments using competitor products take Taser up on its free trial offer, Smith seemed unconcerned.
“I don't think you build a great long-term business by suing people to try to force them to use your product. We’re having several conversations with big agencies that do have competing products that they’re struggling with, and at least a couple of them are likely going to be doing this trial. Now, will there be some litigation? Maybe. We think most of our credible competitors are going to step up, and they’re going to match what we’re doing and that‘s going to be great.
"Ultimately we view this as a way to make this business hypercompetitive instead of winning business on who litigates more effectively, or who’s got the better lobbying team, or who’s got the better relationship to the City Council. Give the cops the chance to try the technology and let them determine what helps them do their job the best."
How Do Cops Feel About Body Cams?
Earlier this year, the Pew Research Center performed an extensive survey of American law enforcement officers. Amid several points of disagreement between the public and the police, the researchers found the use of body cams by officers to be one area of broad agreement. Nearly seven out of 10 officers favor the use of body cameras, though public support – which is virtually unanimous – outpaces that of police significantly. Still, half of all officers say body cameras make police more likely to act appropriately.
A Cambridge University study from late 2016 may provide the reason why.
The cause could be the ‘observer effect,’ which indicates that the mere knowledge of being watched by others improves both suspect behavior and officer compliance with established procedures. According to the study, use of body-worn cameras by officers is associated with a 93 percent drawdown in citizen complaints against the police. A 2015 study by the University of South Florida reported similar findings, with significant reductions in injuries to both civilians and officers when officers wore body cameras.
Still, several high-profile officer-involved shootings have occurred during which officers — whether with malevolent intent or through sincere human error — failed to turn on their body or dashboard cams until after shots were fired. Others have highlighted the danger of policies that seek to restrict public access to footage gathered from the devices.
Both suggest this technology is rendered much less useful without procedures in place for its proper operation, and disciplinary action taken if those procedures aren’t followed.
Challenges And How Axon Products Can Help
“One is just this general tension between police and the public that everybody’s aware of and it’s creating fear on both sides,” Smith said. Indeed, according to Pew, 86 percent of cops say police work is harder following the high-profile incidents of fatal encounters between African-Americans and police that have sparked public outcry, demonstrations, and even retaliatory violence against officers.
“We’ve got riots against police and even executions,” Smith continued. “Certainly there have been some police abuses along the way. Particularly in communities of color there are concerns about their interactions with police.”
Smith points to evidence that the presence of body cameras reduces citizen complaints — by as much as 93 percent in the Cambridge study — with hopes that their use will become more widespread.
“(Officers) all go on patrol with a gun, but they don’t have the body camera to protect the public and the police in the incident that something goes wrong so people can actually trust and know what really happened.”
Secondly, Smith notes that officers feel under-equipped, particularly in terms of technology.
“At most agencies, officers tell us that the technology they have at home as a consumer is far ahead of what they have at work,” Smith said.
In the Pew study, only 31 percent of officers said their department had done very well at equipping them to perform their job. By offering hardware, software, and training free for a year, Taser clearly hopes to remove the most legitimate reasoning behind a department declining to introduce the technology to their forces.
Thirdly, police officers report a shortage in manpower. Pew reported that 86 percent of cops say their department doesn’t have enough officers to adequately police the community.
“Police officers and agencies report to us that cops spend about two-thirds of their day doing paperwork,” Smith said. “They spend one-third of their day doing police work. Not only do officers find that frustrating, but it is a huge waste of money. If we could automate all the paperwork we would have three times the police presence on the street.”
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