Thursday, August 4, 2011

Business outlook for machine vision

July/August is second quarter reporting time for most companies, so I thought it might be fun to see what trends we can deduce from the reports appearing.

Vision Systems Design magazine provide an industry overview under the heading of “Machine-vision market report indicates slowing revenue growth in 2011” (July 28, 2011). The title says it all really, so my only comment is to say that this confirms the hockey stick projections I was making a long time ago: we’ve had the rebound and now we’re back to that pattern of steady and sustainable growth.

Looking for clues in specific company results has become harder since Teledyne acquired Dalsa. All their 2nd quarter report had to say was that Dalsa contributed sales of $63.8m to their imaging group. Not terribly informative.

Likewise, National Instruments reported their half year results at the end of July. Looks like they’re back on track with revenue growth of 20% over the same period in 2010, but how much of that $452m of first half sales came from machine vision? NI don’t say.

Across the pond, Basler don’t report until later in August, but we do know that they had an excellent 1st quarter with revenues up 47% over the start of 2010. Likewise, Augusta, parent of Allied Vision technology, VDS Vosskuhler and LMI Technologies, reported very strong 1st quarter growth.

So what does all this suggest going forwards for the rest of 2011? Can this pace be sustained? Well perhaps the results from Cognex, published August 1st, give us a clue.

Like NI, Cognex also saw first half growth of around 20%, although an interesting side note is that this came all from the Modular Vision Systems Division (InSights, Checkers and the like,) rather than from the much smaller Surface Inspection Systems Division. Also of interest was the note that much of the future growth is anticipated to come from China. This would seem to link with the recent announcement from Foxconn that they intend to dramatically increase their usage of manufacturing automation.

Staying with Cognex, a couple of other points to mention: finance website The Motley Fool recently identified Cognex as one of the very few companies satisfying their “7 Signs of a Winner” criteria. (Perhaps it’s time I finally bought some stock – the dividend alone is at least as good as I can get in bank.) And second, tucked away in the various financial announcements was word that R&D headcount has been increasing. That has to be a good thing, although I suspect the additional resource will be channeled into enhanced smart camera products rather than cool high-end systems, but I guess, as their results show, they are following the money.
So, what of the second half of 2011?

Well clearly, growth is slowing from the pace of 2010, but that’s only to be expected. I also noticed several players commented that the third quarter is traditionally slow, so perhaps like-for-like growth of around 10% should be expected. My guess is that the fourth will be similar, at around 10% compared to Q4 ’10, meaning that 2011 will probably turn out to be the best ever for machine vision.

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