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An analyst and top management from two sector firms examine the Machine Vision Companies sector in this 13-page Machine Vision Companies Report from The Wall Street Transcript, available at (212/952-7433) or www.twst.com

TWST: Could we start out with a quick overview of your coverage?

Mr. Paris: In terms of this interview it’s factory-floor technology, generally for improving quality and efficiency. It includes companies providing machine vision systems, factory floor communications and quality control instruments.

TWST: What has gone on with those companies over the past year or so with this difficult economy?

Mr. Paris: Starting with the big picture, since the 2000 peak we’ve seen a record downturn in overall capital spending and it’s been worse by far for anything relating to capital spending by the electronics and the semiconductor industries. Of course that’s where a lot of the bubble excesses were. So anybody who sells capital spending equipment, software or services to the semiconductor and electronics industries has had the worst experience of their corporate lives over the past couple of years. For the most part, the worst is over and business is slowly, steadily picking up. Business sentiment actually started recovering in the late spring of 2002. After midyear, it turned down again in the face of accounting and business governance scandals followed by the ramp-up for the Iraq war. More recently, especially since the successful prosecution of the Iraq war, business sentiment is recovering again. Business capital spending has understandably been following business sentiment — starting to improve last spring, suffering a relapse, and now showing signs of picking up again. The big question, particularly in technology end markets, is how fast the recovery will be. Some of the better companies are turning up faster than others, but most are showing some kind of sequential improvement. This applies to the machine vision companies we research as well at to others such as Advanced Energy (AEIS), which primarily supplies dependable power systems to many of the same manufacturing customers in technology. All of their businesses are now picking up. The questions are how fast will the pickup be, are there some pent-up demands building in some areas, and are there some weak areas, such as telecom infrastructure, that are going to be slower than others to turn up. But we have turned the corner, and from here on out the next several years should see improving performance in this area.

TWST: What about Perceptron (Nasdaq:PRCP)?

Mr. Paris: There are many different application and technology niches in the machine vision industry. When someone develops a strong position in the niche, often competitors go elsewhere since there are so many other potential opportunities for machine vision yet to be explored. Perceptron is an example of a company with strong technology skills in 3-D (3-dimensional) machine vision, in contrast to Cognex which is strongly focused on 2-D. For that reason, it can effectively inspect much bigger shapes such as entire auto bodies. It has also historically been focused on the automotive industry. Lastly, they also work with companies like Carl Zeiss, which makes coordinate measuring machines, which is another way of checking quality very closely but the product under inspection is physically touched. The key to machine vision is non-contact measurements. Now, coordinate measuring machine companies want to be able to introduce non-contact measurement into their instruments. So Perceptron has alliances with at least two companies that are buying its sensors and software to put into their coordinate measuring machines. The company is currently in a good recovery. The stock has recently rebounded from a low around $1 to around $5 though it once was as high at $35. It is now in good financial condition again and every quarter has been profitable lately.

This special report includes:

1) Analyst Interview - In an in-depth (5,700 words) Interview, Alexander P. Paris Sr., President of Barrington Research Associates, examines the outlook for the sector and shares specific stock recommendations.

2) CEO interviews (average 2,500 words). Top management of two - sector firms examine the outlook for their firm and the sector. Firms include:

Perceptron, Inc., Woodhead Industries, Inc.