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Axon's Most Brilliant Moves in 2017 So Far

Axon's headquarters shown at dusk.

There's no question that Axon Enterprise (NASDAQ: AAXN) is the industry leader in body cameras . And as more law enforcement agencies look to add body cameras, it's often Axon they turn to.

Axon is striving to make its body cameras even more indispensable in the future. Two acquisitions it's made this year will bring artificial intelligence (or at least more efficient operations) to law enforcement when fully implemented.

Axon's headquarters shown at dusk.

Image Source: Axon Enterprise.

AI in law enforcement?

In February, Axon announced the acquisitions of Dextro, a computer vision and deep learning systems company that can make video searchable, and Fossil Group, a machine vision research team that aims to improve the speed of processing images and video. Axon called these acquisitions the start of "Axon AI," and whether they're artificially intelligent or not, they're a great move for the company.

The body camera and cloud service business lines have become more and more commoditized as Safariland, Motorola Solutions, and others have entered the market and started to compete on cost . Axon has made the argument that its product is better, but at some point arguing over image resolution and field of view isn't a sustainable model for any business . What Axon is hoping to do is turn Axon AI into a differentiator that will keep customers in the Axon family.

Records management could be a game changer

When the Dextro and Fossil Group acquisitions were announced, there were some vague statements about their value, like this one from the press release : "Axon AI will transform key customer workflows using computer vision and natural language processing along with machine learning techniques."

This description sounds a bit like "tech buzzword bingo", but the tangible applications that new technology will fold into are going to be important. Axon says it is launching a new records management system (RMS) that will "automate the collection and analysis of virtually all information in public safety," from witness statements to officer interactions. The result should be reduced paperwork for officers, more reliable records for prosecutors and the public, and a more efficient law enforcement system overall.

What could change the game for Axon is if the combination of Axon body cameras,, and the RMS become a de facto standard system for cities across the country. It could be difficult to begin using the system and then change vendors when an initial contract is up in three to five years. And if Axon can get itself engrained in the everyday lives of law enforcement, it'll have customers for life.

Building a business that's built to last

Axon is clearly tying its future to the body camera business and building a high-margin, recurring-revenue business model that will be highly profitable if it gains widespread adoption. Adding a records management system and AI features to the current body cameras and cloud storage could be a huge win that improves law enforcement and develops long-term customer relationships. Building out the capabilities for a lasting business may have been done quietly, but it's the most brilliant move Axon has made this year.

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Travis Hoium owns shares of Axon Enterprise. The Motley Fool owns shares of and recommends Axon Enterprise. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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