Braintech: Intelligent Vision

Baseball fans may have heard this phrase from announcers following a home run, instructing the batter to round all the bases on the way to scoring a run. We at Braintech are working to “Touch Them All” as well, albeit in terms of touching potential new markets, customers, partners and integrators. And while we would love to do so in the grand fashion of bases-loaded home runs, we are well aware that runs are typically generated via walks, singles and doubles. More importantly, we understand that scoring is also the result of aggressive strategy, consistent hustle and being prepared to take advantage of opportunities as they present themselves.

In order to properly frame this discussion it is important to note, as anyone who has read any of our recent public filings knows well, that we currently have a single channel to the market (ABB), who for the most part sells our products into a single market (Automotive). Since November 2007, we have become emboldened to change this. With this in mind, I would like to take the time this week to expand upon why “Touching Them All” is of such a new importance to our future. However, this is no small undertaking and will take some time.

First and foremost, it goes without saying that we are incredibly fortunate to have ABB as a valued partner and we intend to continue this relationship for many years to come. We continue to work in support of their global launch and future vision guidance needs. Braintech Vision Engineers have recently travelled to Germany, Sweden and China supporting new system installations and eVF training. We similarly have had several key Vision Scientists supporting ABB’s new product development efforts at their Corporate Research Center in Windsor, CT. We have recently trained dozens of end-users, integrators and channel partners on eVF from ABB’s Auburn Hills Michigan NA Headquarters - and we continue to update eVisionFactory to fully arm ABB with the Best-In-Class vision tools for their TrueView brand. We even jump in and perform some system integration for them from time to time like a few weeks ago when they had over a dozen TrueView systems on their floor being prepped for shipment at the same time. So let me make myself clear that we remain 100% committed to ABB’s efforts in terms of TrueView.

And with respect to our market position, it is worthy of note that the automotive industry has been a likely starting point for vision guided robots for many very good reasons. First, they remain the largest user of industrial robots and thus the biggest market for our products. Second, their market has dramatically changed over time, requiring multiple models to run down the same manufacturing lines - with those models being redesigned more frequently than ever - meaning that “hard” capital investments can no longer be amortized over several years, greatly benefitting reconfigurable automation such as VGR. Third, their volumes, historical labor rates and strong focus on process-controls have provided great opportunity for ROI based capital investment. Finally, they have historically had the “bandwidth” to accept new technologies and have frequently been the early adopters of technologies prior to greater market acceptance.

All that said, today is a new day and Braintech is rapidly changing and expanding its market approach. The challenges within the domestic auto industry are well known [down 18% for first quarter 2008]. And integrating our product into ABB’s $1.5 Billion global robotics division is an ongoing and time consuming effort. Growth into developing countries is in process but there are obstacles in terms of lower labor costs, different quality requirements, marginal occupational safety laws and infrastructure. And while committed to overcoming these obstacles, we realize that like any good investment portfolio, our investment in the future of the company requires diversification. And frankly, we can’t do so quickly enough. The good news is that we have the leadership and plan in place to do it.

Not to state the obvious but with very few exceptions, the reason corporations invest in capital equipment is to gain an eventual return on that investment. As we have experienced, this return can take on many shapes and forms. We have over the last few years supplied systems that were justified for literally dozens of different reasons including labor elimination, custom fixture elimination, the ability to design less expensive part packaging and dunnage, operator safety, warranty reduction, part defect detection, clean room requirements, ergonomics, shift elimination and productivity enhancement. My point is that many of these very same manufacturing and distribution challenges exist while making toilets, packaging candy bars, assembling military equipment or palletizing 12-packs of your favorite beverage. And many of these industries are slowly but surely becoming adopters of robotic automation. So in addition to creating new product solutions in the markets we have reorganized the company around (Government/Military, Consumer & Industrial), we also need to apply the lessons learned on our current product and from our ABB Automotive experience to other markets. This is our nearest term revenue opportunity and as such a great portion of our current focus: Technology Transfer into markets that can most benefit from our existing technologies and products. The company has written about this before using the term ”operating leverage”.

We have thus initiated a front end business development program to introduce ourselves to newly targeted vertical markets. It is simply good business to do so and our new leadership recognized this early on and is in full support of these efforts. We have recently attended five non-automotive trade shows. We are engaging and have met with several potential hardware and software partners within the VGR industry. We have active proposals with potential system integration partners to assist us in our entry into new markets. We have active proposals in non-automotive industrial applications. And we have active proposals within the government and consumer space. We are currently engaged with dozens of newly developed contacts within the aerospace, government, military, edutainment, food & beverage, medical, consumer, general industry and distribution markets. In short we are executing our plan with the intent to realize the benefit of these efforts in the form of 2009 revenue.

As one can choke if biting off too much to chew, it is vital as a small company that we go about this wisely and efficiently. We simply can not be everything to everybody. So as a result of our “Touch Them All” efforts we are continually migrating towards a more defined business development effort. We will soon begin, based on acquired data and defined opportunities, to focus on a handful of specific vertical markets with specific solution needs and a specific product development path.

To return to my initial baseball analogy - we have to swing at strikes - and once on base, we have to avoid getting picked off or caught in a run down. We simply don’t yet have the critical mass to absorb any costly mistakes. And at the end of the day, we know we can’t hit a grand slam unless we first load the bases.

I hope to announce some of our initial successes in the very near future. Until then, thanks again for taking the time to visit our site.

Regards,
Jim Dara