By Stephen Nellis
SAN FRANCISCO (Reuters) - Taser International Inc (O:TASR), maker of the eponymous device used by police to stun and incapacitate a person temporarily, is changing its name to Axon as it pushes further into the software business.
The Axon name comes from Taser's unit that sells police body cameras, patrol car cameras and the software for managing the hours of digital footage they generate.
In a gamble that police departments will sign up for paid software subscriptions, the company is offering free body cameras to police officers in addition to a year of free access to Evidence.com, its online software for managing video and other evidence.
Its shares were down 0.8 percent at $21.83, after rising more than 6 percent in anticipation of a company announcement.
Taser still gets the bulk of its revenue from its weapons, which use electrical current to immobilize targets. Last year, $202.6 million of its $268.2 million in revenue came from its weapons segment, mostly in the form of replacement cartridges.
Nearly a quarter of Taser's revenue now comes from the Axon segment. Software revenue for Evidence.com nearly doubled to $11.7 million.
"The hardware creates an issue for police departments in a sense that you're creating hours and hours of raw data," said Steve Dyer, senior research analyst for Craig-Hallum Capital Group. "You have the question not only of how to store the data in an industry that is not traditionally that tech savvy, but also how to handle digital evidence with the same safeguards as physical evidence."
Evidence.com software is sold on a subscription basis, typically five-year contracts. That means Taser has to spend money to sign up customers, while revenue follows over length of the contract.
Software companies including Salesforce.com (N:CRM) or Workday Inc (N:WDAY) have persuaded investors to accept this revenue model. But it can cut into profits in the short term: Taser's profits dipped from $19.9 million to $17.2 million last year despite strong revenue growth.
"Once an agency has been on board with Evidence.com for five years, we think the churn rate will be quite low," Chief Executive Rick Smith told Reuters.
Since Taser only started selling software in earnest in 2012, there is still little data to support Smith's assertion. Meantime, the company is working to add features: it acquired an artificial intelligence start-up called Dextro this year, providing technology that helps police search and redact footage.