Cognex's 'Ho-Hum' First Quarter

April 19, 2005

After the end of each quarter, the TMCnet Web site receives a constant stream of�news releases�from companies announcing their financial results (or announcing the conference call at which they will announce their financial results, or announcing the date on which they will announce their financial results).

In keeping with the revered PR tradition of spinning every event to keep the company from looking bad, the headlines are almost always�either upbeat or neutral. So it was refreshing to see this headline from Cognex Corporation this afternoon:

Cognex Corporation Announces Ho-Hum First Quarter Results

Thank you, Cognex Corporation, for your refreshing candor! In fact, I feel obligated to try my best to give you a little extra press coverage in gratitude for your issuing some man-bites-dog news today!

Cognex, I discovered just now, is actually an interesting company beyond the striking honesty�of their�public relations representatives. They make machine vision systems, or "computers that can see." Cool! Their Surface Inspections Systems�Division in Alameda, Calif.,�"specializes in machine vision systems that are used for inspecting the surfaces of products manufactured in a continuous fashion, such as metals, papers and plastics."

Sounds like�a great business to be in. In fact, in labeling their financial results "ho-hum," Cognex is being overly modest. Here's what the press release says:

"Cognex Corporation (NASDAQ: CGNX) today announced revenue for the first quarter ended April 3, 2005, of $43,198,000, and net income of $5,294,000, or $0.11 per diluted share."

The fourth quarter in 2004 they made $.18/share and $.14/share in Q4 2004, so their trend is down somewhat, but not that bad as far as I can tell.

The release contains the following quote from the company's CEO:

"'Although we met Wall Street's consensus expectations for the quarter, and although our net profits were very respectable by most companies' standards (at 12.25% of revenue), they are not yet where we want them to be. Furthermore, both the year-on-year and sequential quarterly comparables are also disappointing,' lamented Dr. Robert J. Shillman, Cognex's Chief Executive Officer and Chairman. 'There was some glimmer of good news in the quarter...orders increased by 16% over Q4-2004, and our book-to-bill was above 1.0. And, we are mildly encouraged by the fact that all three of the primary markets that we serve showed sequential bookings increases; the largest was for SmartView, our vision system for surface inspection, which booked a record $12,000,000 in the first quarter, far surpassing the prior record.'"

Yes, thank you, Dr. Shillman, for sharing that lament. You have our deepest sympathy for your plight. Something tells me that CGNX might be good to buy.

AB -- 4/19/05