Cognex Settles Patent Dispute

Cognex Corporation (CGNX - Analyst Report) recently announced that it has settled its dispute with Multitest Elektronische Systeme GmbH and its U.S. subsidiary. The dispute was regarding Multitest’s importation and sale of equipment containing HALCON machine vision software. 

Headquartered in Massachusetts, Cognex Corporation designs, develops, manufactures and markets machine vision systems. 

Cognex had earlier alleged in a filing with the U.S. International Trade Commission (ITC) that HALCON software, marketed by MVTec Software GmbH, infringes at least three Cognex machine vision patents. Additionally, ITC is investigating 20 other companies for violating Cognex patents by selling, importing and using MVTec products that contain machine vision technology that has been invented and patented by Cognex. 

Other terms of the settlement were not disclosed. 

Management added that the company had invested over $100 million in R&D to develop its leading edge technology and will continue to take a very strong stand to protect its patents whenever the company discovers infringement from other companies. 

Last month, the company reported weak results for the second quarter of 2009 due to a sharp slowdown in customer demand in the past few months. Nevertheless, the rate of decline slowed down and order rates stabilized a bit. The recent cost cutting measures undertaken by the management led to 20% year over year and 14% sequential reduction in Selling, General and Administrative expenses. 

Over the past six months, management eliminated 145 employees and contractors and reduced salaries of some executives. The company cancelled its current vacancies, added additional days to its mandatory shutdown schedule, reduced leased office space, lowered its contribution to 401K and made cuts in discretionary spending. Cognex eliminated most of the planned new positions assigned to 2009 and stated that there will be no salary increases in 2009 other than for promotions. Moreover, budgets for discretionary spending such as travel and trade shows, were cut dramatically and less important engineering projects and operation projects were either put on hold or cancelled entirely. 

The company expects to report a lower loss in the third quarter as most of the restructuring is complete and it expects to realize full benefit of its cost cutting actions. Operating expenses are estimated to decrease by 5% to 8% on a sequential basis.