In a blockbuster deal completed on Monday, May 9, Cognex Corp., a Natick, Mass., manufacturer of machine vision systems, has purchased competitor DVT Corp., based in Duluth, Ga., for about $115 million. The vision sensor market has been one of the most hotly contested for the past few years, but apparently, the time has come for consolidation.
In an interview with Automation World, Robert "Dr. Bob" Shillman, Cognex chairman and chief executive officer, remarked, “Perhaps some would say that we paid too much for DVT, and the other side were superb negotiators. We are confident that profits and growth are there to accrete profits to Cognex in excess of the purchase price.”
Although Cognex management didn't comment with specifics about the new organization, Shillman noted that savings will be obtained through elimination of duplicate positions.
Crown jewel
In a conference call discussing the acquisition with analysts on Tuesday, May 10, Shillman praised the product design and distribution management teams at DVT. In fact, he spent considerable time during the call discussing distribution, something that Cognex obviously considers to be the crown jewel of the acquisition. Cognex already had about 40 distributors, and picks up around 150 more from DVT.
Shillman praised DVT as a great company and a great competitor, saying it was better than Cognex at solving the "smaller" vision problems with speed and ease-of-use. Cognex expects to rationalize the product lines and eventually present one complete family of vision products, from sensors to high-end systems. Shillman did specifically state that Cognex would continue support of DVT products.
DVT’s principal product, Legend, is sold primarily to the factory-floor segment of the machine vision business for applications such as inspection and quality control, with sales of around $28 million, according to Cognex Chief Financial Officer Richard Morin. Cognex’s competitive In-Sight product line, defined as vision systems, had grown to over $60 million, according to Shillman. The latest product entry for Cognex, Checker, is billed as a true vision sensor by the company.
Shillman noted that Cognex had grown by acquisition in the past, but that the previous largest acquisition was a company with about 30 employees. DVT has about 90. "This is the largest acquisition that Cognex has ever completed...in terms of price, in terms of revenue, and most importantly, in terms of the positive impact that it will likely have on our company," said Shillman.
Who’s left?
When asked further in the exclusive interview with Automation World about what competition is left in the vision market segment of the factory floor, Shillman singled out Banner Engineering Corp., Minneapolis; Keyence Corp. of America, Woodcliff Lake, N.J.; and Omron Electronics LLC, Schaumburg, Ill. “It will be tough for them to catch us in the near term,” he added, “because the investment is so great to go from sensor to vision system. You need more that a lot of Ph.D.s in math. These experts must also have factory experience so that they can design systems that will last in that environment.”
When asked if reduced competition would result in higher prices for customers, Shillman replied, “I believe the responsibility of a company is to drive down prices, but only in an elastic market. DVT’s [Chief Executive Officer Bob] Steinke discovered that and awakened us to the fact that there was considerable elasticity in that market segment. I feel that there is still some market elasticity (incremental sales increase relative to a price decrease).”
Shillman pointed to a Cognex initiative headed by Senior Vice President John McGarry with a mission to develop a vision system on a chip. This new technology has the potential to drastically reduce prices.
In any merger or acquisition, the first thought of employees is who will stay and who will be let go. Shillman dodged a direct answer to the question, but did say, “We want to keep the best people.”
ARC Advisory Group Senior Analyst Dick Slansky noted, “I think this move positions Cognex really well on the factory floor.”
