News analysis: Cognex strengthens vision offerings, reach in DVT buyout

The $115-million Cognex acquisition of DVT, announced May 9, will maintain operations at DVT’s facility in Duluth, GA, and expand markets. Support for existing Cognex and DVT vision products will continue, with existing staff and via a much larger, combined third-party distribution channel. “This is the largest acquisition that Cognex has ever completed in terms of price and revenue, and, most importantly, in terms of the positive impact that it will likely have on our company,” says Dr. Robert Shillman, Cognex’s chairman and CEO. It adds about $30 million in DVT 2004 revenue to Cognex’s $202 million, seems likely to improve margins, and significantly expands Cognex’s share of revenue from factory automation, officials suggest.

For customers of each, it means keeping the best of Cognex In-Sight and DVT Legend product lines, with greater innovation and less duplication. It also means wider access to a broader machine vision product line globally; some U.S. regions were not served by Cognex direct sales or smaller distributor force. “During 2004, Cognex started to build a third-party distribution channel, and prior to this acquisition we had signed over 40 distributors, mostly in North America. With the acquisition of DVT, Cognex immediately gains a worldwide network of more than 150 additional industrial distributors, all fully trained in selling and supporting machine vision products,” says Shillman.

DVT long promoted four days of free training, free online support, and free software with its products. “Really what we’re talking about is serving the customer with value,” Shillman told Control Engineering . “DVT margins, which were higher than ours incidentally, at 79 or 80 percent, show that they weren’t giving away anything.” DVT has long touted faith-based tenets of Servant Leadership and Agape Support. Cognex officials have expressed similar values without linking them to faith.

In Control Engineering ’s latest “Product Research” survey, 34% of respondents purchased from DVT in the past year, compared to 32% for Cognex. Commenting on that point, Cognex says it has twice as much revenue in the factory automation space where it competed with DVT. (Also in that survey, 22 was the average number of machine vision products each survey participant purchased during the past 12 months, for average spending of $116,756 per respondent; 35% said they’d buy more machine vision product over the next year; 54% about the same amount.)

Acquisition of DVT was under consideration for five years, Cognex said. DVT manufactures vision sensors, which it sells mostly to the machine vision industry’s plant-floor sector. DVT’s main product line, Legend, is used in many applications for inspection and quality control. Cognex’s Massachusetts-based Modular Vision Systems division specializes in machine vision systems used to automate discrete manufacturing and for quality assurance. The Cognex Surface Inspection Systems division in Alameda, CA, specializes in machine vision systems used for inspecting surfaces of metal, paper, plastic, and other continuously manufactured products.

What it means for product lines: the acquisition means eliminating some overlap in the Cognex In-Sight and DVT Legend product lines, and consolidating/strengthening of software, says Shillman. Planned introductions by Cognex include efforts in the ultra-low cost vision area, which will be even better sold by a stronger, distributor-based channel, along with the existing Cognex Checker inspection-only vision sensor. DVT was just entering the semiconductor market ( Control Engineering , May 2005, p. 65) with introduction of a new wafer reader product, after DVT’s 2004 purchase of MTI Machine Vision LLC, which produced semiconductor wafer reading algorithms. The DVT wafer reader won’t be available; interested customers are being referred to an array of existing Cognex products available for that market. DVT also recently upgraded its vision software, which, Shillman concedes, might be seen on the low end of the marketplace as easier to use and perhaps more effective. In general, any acquisition offers potential for stronger future product introductions by incorporating strengths of all technologies and expertise.

For investors, it means adding DVT’s revenue (mostly factory automation) into the mix of Cognex sales. Cognex revenue in 2004 was $202 million: 44% factory automation, 42% semiconductor and electronics OEMs, and 14% surface inspection, for $202 million total. The DVT acquisition (the largest for Cognex by five-fold) adds about $30 million in revenue to the mix. In 2004, around 30% of DVT sales were outside the U.S. and growing. DVT has been growing in line with Cognex targets and expectations over the past few years: 18-20% revenue growth; gross margin of 79%; operating margin of 19%.

For competitors, such as Omron Electronics and Keyence, it means more competition, especially in Asia, suggested Jim Hoffmaster, Cognex president and COO, and acting business unit manager for In-Sight products. Prior to the announced acquisition, Cognex already added sales staff in Asia, he said; the acquisition augments representation there.

Recent/future Cognex products: Camera Link frame grabber and FireWire software expand digital camera options for machine vision applications. MVS-8600 Series of frame grabbers supports the Camera Link digital communications standard and is suitable for high-resolution and high-speed machine vision applications that require very fast processing of large quantities of image data. FireWire software allows direct connection of IEEE1294 cameras to Cognex PC vision systems. Software simplifies integration, expands acquisition options, and allows cost effective achievement of high-quality digital images without using a frame grabber. July Control Engineering news coverage includes an exclusive Cognex product introduction in the wafer reader area.

Related reading:

Cognex buys DVT for $115 million

Research Machine Vision: Machine Vision Looks Well Beyond Inspection

DVT 2004: vision moves past‘big lie’ perception

—Mark T. Hoske, editor-in-chief, Control Engineering, MHoske@cfemedia.com

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