Cognex reports third quarter results

Cognex is one of the leaders in the machine vision industry, so their financial performance provides a guide as to how things are going in the industry as a whole. Their Q3 results, published today (November 2nd,) are actually rather similar to those of Dalsa, who reported last week, in that they seem to be at the beginning of an upward trend.

The headline figures are that revenue (sales) is up 1% on the second quarter of ’09, although down 35% year-on-year, while income (profit) jumped 170%, representing a swing of some $11m. Unfortunately though, a closer look reveals a couple of concerns.

First, on the profitability front, Cognex counsel that Q4 will not be as good as Q3, due in part to a “tax adjustment” of $3.5m experienced during the last quarter.

Second, and of greater concern to yours truly, is the news that R&D expenditures have been cut 12% from Q2 ’09 and are down 26% against Q3 ’08. By my estimation that means R&D will be down around $5m in 2009 as compared to 2008. That can’t be good, but I wonder if it also reflects an inability to find the next big thing? I imagine that R&D would be spared the axe if it was generating a stream of killer new products, so is it fair to say that the pipeline is somewhat empty?

On the positive side though, and something I admit that I missed when it happened, is the news that Cognex made a small acquisition early in October ’09. This was “… assets associated with the SmartAdvisor™ web monitoring product line,” for which they paid $4.5m.

SmartAdvisor™ was a product of Monitoring Technology Inc. of Fairfax, Virginia, and as the name suggests, is used to monitor industrial equipment. I see this as an interesting diversification and I shall be watching closing to see where it takes the good people from Natick.

By the way, if you want to read more about my webcam comparo, check back tomorrow.