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UNITED STATES
 SECURITIES AND EXCHANGE
    COMMISSION
 Washington, D.C.
    20549
  FORM 10-K
 (Mark One)
 December 31, 2008
  
  Commission File Number 0-17869
  COGNEX
    CORPORATION
  (Exact name of registrant as
    specified in its charter)
 Massachusetts

04-2713778(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)   One Vision
    Drive
    Natick, Massachusetts
    01760-2059(508) 650-3000
 (Address, including zip code,
    and telephone number,
 including area code, of
    principal executive offices)
   Title of Each Class

Name of Exchange on Which RegisteredCommon Stock, par value $.002 per share

The NASDAQ Stock Market LLCPreferred Stock Purchase Rights

The NASDAQ Stock Market LLC      Yes                          No X
   Yes                          No X
   Yes X                         No
  Regulation S-K Form 10-K Form 10-K.  [  ]
  12b-2
  x  Large
    accelerated
    filer     o  Accelerated
    filer     o  Non-accelerated
    filer     o  Smaller
    reporting company
  (Do not check if a smaller
    reporting company)
  Rule 12b-2
 Yes                          No X
   as of June 29, 2008:
    $883,204,000
 $.002 par value common stock
    outstanding as of February 1, 2009:
    39,655,421 shares




---



##### 





COGNEX
    CORPORATION ANNUAL REPORT ONFORM 10-K
    FOR THE YEAR ENDED DECEMBER 31, 2008
   INDEX
   
 PART IITEM 1.


BUSINESS


1ITEM 1A.


RISK FACTORS


7ITEM 1B.


UNRESOLVED STAFF COMMENTS


13ITEM 2.


PROPERTIES


14ITEM 3.


LEGAL PROCEEDINGS


14ITEM 4.


SUBMISSION OF MATTERS TO A VOTE OF SECURITY
    HOLDERS


15ITEM 4A.


EXECUTIVE OFFICERS AND OTHER MEMBERS OF THE
    MANAGEMENT TEAM OF THE REGISTRANT


16PART IIITEM 5.


MARKET FOR REGISTRANTS COMMON EQUITY,
    RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
    SECURITIES


17ITEM 6.


SELECTED FINANCIAL DATA


20ITEM 7.


MANAGEMENTS DISCUSSION AND ANALYSIS OF
    FINANCIAL CONDITION AND RESULTS OF OPERATIONS


21ITEM 7A.


QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
    MARKET RISK


40ITEM 8.


FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


43ITEM 9.


CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
    ACCOUNTING AND FINANCIAL DISCLOSURE


81ITEM 9A.


CONTROLS AND PROCEDURES


81ITEM 9B


OTHER INFORMATION


83PART IIIITEM 10.


DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
    GOVERNANCE


84ITEM 11.


EXECUTIVE COMPENSATION


84ITEM 12.


SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
    AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS


84ITEM 13.


CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
    AND DIRECTOR INDEPENDENCE


85ITEM 14.


PRINCIPAL ACCOUNTANT FEES AND SERVICES


85PART IVITEM 15.


EXHIBITS AND FINANCIAL STATEMENT
    SCHEDULES


86EX-10T SUMMARY OF ANNUAL BONUS PROGRAMEX-10U SUMMARY OF DIRECTOR COMPENSATIONEX-10X AMENDMENT TO EMPLOYMENT AGREEMENT WITH ROBERT WILLETTEX-21 SUBSIDIARIES OF THE REGISTRANTEX-23.1 CONSENT OF GRANT THORNTON LLPEX-23.2 CONSENT OF ERNST & YOUNG LLPEX-31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICEREX-31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICEREX-32.1 CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (CEO)EX-32.2 CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (CFO)




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PART I  Form 10-K Form 10-K.
    ITEM 1.
    BUSINESS  Corporate
    Profile
  (508) 650-3000.
    Cognex has two operating divisions: Form 10-K.
  What is Machine Vision?
   1




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Question

Description

ExampleGUIDANCEWhere is it?

Determining the exact physical location and orientation of an
    object.

Determining the position of a printed circuit board so that a
    robot can automatically be guided to place electronic components.IDENTIFICATIONWhat is it?

Identifying an object by analyzing its shape or by reading a
    serial number or symbol.

Reading a two-dimensional barcode directly marked on an
    automotive airbag so that it can be tracked and processed
    correctly through manufacturing.INSPECTIONHow good is it?

Inspecting an object for flaws or defects.

Inspecting the paper that US currency is printed on.GAUGINGWhat size is it?

Determining the dimensions of an object.

Determining the diameter of a bearing prior to final assembly.   Machine Vision
    Market
           2




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Business
    Strategy
      Acquisitions and
    Divestitures
      Form 10-K.
  Products
   3




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Vision
    Software
  tm
  Vision
    Systems
  ® ®
  Vision
    Sensors
  ®
  ID
    Products
  ®
  Surface
    Inspection Systems
  ®
  Research,
    Development, and Engineering
   4




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Manufacturing and
    Order Fulfillment
      Sales Channels
    and Support Services
     5




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Form 10-K.
      Intellectual
    Property
    ® ® ® ® ® tm
  Compliance with
    Environmental Provisions
   6




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Competition
      Backlog
    Employees
    Available
    Information
  www.cognex.com. Form 10-K, Form 10-Q, Form 8-K, Form 10-K.
  ITEM 1A.
    RISK
    FACTORS   7




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Form 10-K.
  Current and future conditions in the global economy may
    negatively impact our operating results.
        
    our customers may not have sufficient cash flow or access to
    financing to purchase our products,
    our customers may not pay us within agreed upon credit terms or
    may default on their payments altogether,
    our vendors may be unable to fulfill their delivery obligations
    to us as their business deteriorates,
    lower forecasted demand for our products may result in charges
    for excess and obsolete inventory if we are unable to sell
    inventory that is either already on hand or committed to
    purchase,
    lower forecasted cash flows may result in impairment charges for
    acquired intangible assets or goodwill,
    a decline in the fair value of our limited partnership interest
    in a venture capital fund, which is invested primarily in young
    and emerging companies, may result in an impairment charge,
    a decline in our stock price may make stock options a less
    attractive form of compensation and a less effective form of
    retention for our employees, and
    the trading price of our common stock may be volatile.    Downturns in the
    semiconductor and electronics capital equipment market may
    adversely affect our business.
   8




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Economic,
    political, and other risks associated with international sales
    and operations could adversely affect our business and operating
    results.
    
    various regulatory requirements,
    export and import restrictions,
    transportation delays,
    employment regulations and local labor conditions,
    difficulties in staffing and managing foreign sales operations,
    instability in economic or political conditions,
    difficulties protecting intellectual property,
    business systems connectivity issues, and
    potentially adverse tax consequences.    Fluctuations in
    foreign currency exchange rates and the use of derivative
    instruments to hedge these exposures could adversely affect our
    reported results, liquidity, and competitive position.
       9




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The loss of a
    large customer could have an adverse effect on our
    business.
    The failure of a
    key supplier to deliver quality product in a timely manner or
    our inability to obtain components for our products could
    adversely affect our operating results.
    Our business
    could suffer if we lose the services of, or fail to attract, key
    personnel.
      Our products may
    contain design or manufacturing defects, which could result in
    reduced demand, significant delays, or substantial
    costs.
   10




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
    substantial delays in shipment,
    significant repair or replacement costs, or
    potential damage to our reputation.    Our failure to
    develop new products and to respond to technological changes
    could result in the loss of our market share and a decrease in
    our revenues and profits.
    Our failure to
    effectively manage product transitions or accurately forecast
    customer demand could result in excess or obsolete inventory and
    resulting charges.
    Our failure to
    properly manage the distribution of our products and services
    could result in the loss of revenues and profits.
    If we fail to
    successfully protect our intellectual property, our competitive
    position and operating results could suffer.
   11




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
    protect our proprietary technology,
    protect our patents from challenge, invalidation, or
    circumvention, or
    ensure that our intellectual property will provide us with
    competitive advantages.    Our company may
    be subject to time-consuming and costly litigation.
  Form 10-K.
  Increased
    competition may result in decreased demand or prices for our
    products and services.
  Form 10-K
  Implementation of
    our acquisition strategy may not be successful, which could
    affect our ability to increase our revenue or profitability and
    result in the impairment of acquired intangible
    assets.
    
    the inability to find or close attractive acquisition
    opportunities,
    the diversion of managements attention from other
    operational matters,
    the inability to realize expected synergies resulting from the
    acquisition,
    the failure to retain key customers or employees, and
    the impairment of acquired intangible assets resulting from
    lower-than-expected cash flows from the acquired assets.   12




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We are at risk
    for impairment charges with respect to our investments or for
    acquired intangible assets or goodwill, which could have a
    material adverse effect on our results of operations.
              We may have
    additional tax liabilities, which could adversely affect out
    operating results and financial condition.
    ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS   13




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ITEM 2:
    PROPERTIES            ITEM 3:
    LEGAL
    PROCEEDINGS  and/or patent-in-suit, patent-at-issue
    and/or
   14




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and/or
    ITEM 4:
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS   15




---



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ITEM 4A: EXECUTIVE
    OFFICERS AND OTHER MEMBERS OF THE MANAGEMENT TEAM OF THE
    REGISTRANT



The following table sets forth the names, ages, and titles of
    Cognexs executive officers at December 31, 2008: Name

Age

TitleRobert J. Shillman

62

Chief Executive Officer, President, and Chairman of the Board
    of DirectorsEric Ceyrolle

55

Executive Vice President of Worldwide Sales and Marketing, MVSDRichard A. Morin

59

Senior Vice President of Finance and Administration, Chief
    Financial Officer, and TreasurerJustin Testa

56

Executive Vice President and Business Unit Manager, Vision
    SystemsRobert Willett

41

President, Modular Vision Systems Division (MVSD)            16




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PART II ITEM 5: MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER
    MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES



The Companys common stock is traded on The NASDAQ Stock
    Market LLC, under the symbol CGNX. As of February 1, 2009,
    there were approximately 600 shareholders of record of the
    Companys common stock. The Company believes the number of
    beneficial owners of the Companys common stock on that
    date was substantially greater.



The high and low sales prices of the Companys common stock
    as reported by the NASDAQ Stock Market for each quarter in 2008
    and 2007 are as follows: First


Second


Third


Fourth2008High

$
22.16


$
28.10


$
25.00


$
21.23Low


14.67



21.25



16.57



10.822007High

$
24.85


$
24.24


$
25.87


$
22.35Low


20.83



20.20



16.68



16.74       Rule 10b5-1 Rule 10b5-1
     17




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Total Number of


Approximate DollarShares Purchased as


Value of SharesTotal


Average


Part of Publicly


that May Yet BeNumber of


Price Paid


Announced Plans or


Purchased Under thePeriod

Shares Purchased


per Share


Programs (1)


Plans or ProgramsSeptember 29  October 26, 2008


1,266,298


$
19.39



1,266,298


$
30,000,000October 27  November 23, 2008


-



-



-


$
30,000,000November 24  December 31, 2008


-



-



-


$
30,000,000Total


1,266,298


$
19.39



1,266,298


$
30,000,000     (1)
    
    In March 2008, the Companys Board of Directors authorized
    the repurchase of up to an additional $30,000,000 of the
    Companys common stock under a
    Rule 10b5-1
    Plan. This repurchase program was completed during the fourth
    quarter of 2008. In April 2008, the Companys Board of
    Directors authorized the repurchase of up to an additional
    $50,000,000 of the Companys common stock. 18




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3820-3829
  COMPARISON OF
    5 YEAR CUMULATIVE TOTAL RETURN* Among
    Cognex Corporation, The NASDAQ Composite Index
    And NASDAQ Stocks
    (SIC 3820-3829
    U.S. Companies) Lab Apparatus & Analyt, Opt, Measuring, and
    Controlling Instr
  
  
  12/2003

12/2004

12/2005

12/2006

12/2007

12/2008Cognex Corporation


100.00



99.57



108.63



87.12



74.81



56.44NASDAQ Composite


100.00



110.08



112.88



126.51



138.13



80.47NASDAQ Stocks


100.00



91.42



90.35



98.55



112.42



58.86   (SIC
    3820-3829
    U.S. Companies) Lab Apparatus & Analytical,
    Optical, Measuring, and Controlling Instrument
 19




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ITEM 6:
    SELECTED
    FINANCIAL DATA  Year Ended December 31,2008


2007


2006


2005


2004(In thousands, except per share amounts)Statement of Operations Data:Revenue

$
242,680


$
225,683


$
238,318


$
216,875


$
201,957Cost of revenue (1)


68,427



64,350



64,838



62,899



57,371Gross margin


174,253



161,333



173,480



153,976



144,586Research, development, and engineering expenses (1)


36,262



33,384



32,332



27,640



27,063Selling, general, and administrative expenses (1)


112,629



99,813



96,675



82,332



70,674Restructuring charge


258



-



-



-



-Operating income


25,104



28,136



44,473



44,004



46,849Nonoperating income


10,264



7,986



6,104



4,242



6,311Income from continuing operations before income tax expense


35,368



36,122



50,577



48,246



53,160Income tax expense on continuing operations


4,869



8,575



10,549



12,544



15,416Income from continuing operations


30,499



27,547



40,028



35,702



37,744Loss from operations of discontinued business, net of tax


(3,224
)


(648
)


(173
)


-



-Net income

$
27,275


$
26,899


$
39,855


$
35,702


$
37,744Basic earnings per weighted-average common and common-equivalent
    share:Income from continuing operations

$
0.74


$
0.63


$
0.88


$
0.76


$
0.83Loss from discontinued operations

$
(0.08
)

$
(0.01
)

$
(0.01
)

$
0.00


$
0.00Net Income

$
0.66


$
0.62


$
0.87


$
0.76


$
0.83Diluted earnings per weighted-average common and
    common-equivalent share:Income from continuing operations

$
0.73


$
0.63


$
0.86


$
0.74


$
0.80Loss from discontinued operations

$
(0.07
)

$
(0.02
)

$
(0.01
)

$
0.00


$
0.00Net Income

$
0.66


$
0.61


$
0.85


$
0.74


$
0.80Weighted-average common and common equivalent shares outstanding:Basic


41,437



43,725



45,559



46,709



45,480Diluted


41,554



44,063



46,648



47,935



47,358Cash dividends per common share

$
0.47


$
0.34


$
0.33


$
0.32


$
0.28(1) Amounts include stock-based compensation expense, as follows:Cost of revenue

$
1,116


$
1,215


$
1,596


$
-


$
-Research, development, and engineering


3,067



3,239



3,627



-



-Selling, general, and administrative


6,048



7,261



8,401



-



-Total stock-based compensation expense

$
10,231


$
11,715


$
13,624


$
-


$
-   December 31,2008


2007


2006


2005


2004(In thousands)Balance Sheet Data:Working capital

$
213,374


$
269,528


$
266,647


$
268,612


$
242,460Total assets


474,047



539,546



528,651



564,562



533,308Long-term debt


-



-



-



-



-Shareholders equity


413,075



476,365



473,850



506,521



462,807  20




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ITEM 7: MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS



FORWARD-LOOKING
    STATEMENTS



Certain statements made in this report, as well as oral
    statements made by the Company from time to time, constitute
    forward-looking statements within the meaning of
    Section 27A of the Securities Act of 1933, as amended, and
    Section 21E of the Securities Exchange Act of 1934, as
    amended. Readers can identify these forward-looking statements
    by our use of the words expects,
    anticipates, estimates,
    believes, projects, intends,
    plans, will, may,
    shall, could, and similar words and
    other statements of a similar sense. These statements are based
    upon our current estimates and expectations as to prospective
    events and circumstances, which may or may not be in our control
    and as to which there can be no firm assurances given. These
    forward-looking statements involve known and unknown risks and
    uncertainties that could cause actual results to differ
    materially from those projected. Such risks and uncertainties
    include: (1) current and future conditions in the global
    economy; (2) the cyclicality of the semiconductor and
    electronics industries; (3) the inability to achieve
    significant international revenue; (4) fluctuations in
    foreign currency exchange rates; (5) the loss of a large
    customer; (6) the reliance upon key suppliers to
    manufacture and deliver critical components for our products;
    (7) the inability to attract and retain skilled employees;
    (8) the inability to design and manufacture high-quality
    products; (9) the technological obsolescence of current
    products and the inability to develop new products;
    (10) the failure to effectively manage product transitions
    or accurately forecast customer demand; (11) the failure to
    properly manage the distribution of products and services;
    (12) the inability to protect our proprietary technology
    and intellectual property; (13) our involvement in
    time-consuming and costly litigation; (14) the impact of
    competitive pressures; (15) the challenges in integrating
    and achieving expected results from acquired businesses;
    (16) potential impairment charges with respect to our
    investments or for acquired intangible assets or goodwill; and
    (17) exposure to additional tax liabilities. The foregoing
    list should not be construed as exhaustive and we encourage
    readers to refer to the detailed discussion of risk factors
    included in Part I  Item 1A of this Annual
    Report on
    Form 10-K.
    The Company cautions readers not to place undue reliance upon
    any such forward-looking statements, which speak only as of the
    date made. The Company disclaims any obligation to subsequently
    revise forward-looking statements to reflect the occurrence of
    anticipated or unanticipated events or circumstances after the
    date such statements are made.



EXECUTIVE
    OVERVIEW



Cognex Corporation is a leading worldwide provider of machine
    vision products that capture and analyze visual information in
    order to automate tasks, primarily in manufacturing processes,
    where vision is required. Our Modular Vision Systems Division
    (MVSD) specializes in machine vision systems that are used to
    automate the manufacturing of discrete items, while our Surface
    Inspection Systems Division (SISD) specializes in machine vision
    systems that are used to inspect the surfaces of materials
    processed in a continuous fashion.



In addition to product revenue derived from the sale of machine
    vision systems, the Company also generates revenue by providing
    maintenance and support, training, consulting, and installation
    services to its customers. Our customers can be classified into
    three primary markets: discrete factory automation,
    semiconductor and electronics capital equipment, and surface
    inspection. 
    Discrete factory automation customers purchase Cognex vision
    products and incorporate them into their manufacturing
    processes. Virtually every manufacturer can achieve better
    quality and manufacturing efficiency by using machine vision,
    and therefore, this segment includes a broad base of customers
    across a variety of industries, including automotive, consumer
    electronics, food and beverage, health and beauty, medical
    devices, packaging, and pharmaceutical. Sales to discrete
    factory automation customers represented approximately 68% of
    total revenue in 2008, compared to 62% of total revenue in 2007.
    Semiconductor and electronics capital equipment manufacturers
    purchase Cognex vision products and integrate them into the
    automation equipment that they manufacture and then sell to
    their 21




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customers to either make semiconductor chips or assemble printed
    circuit boards. Demand from these capital equipment
    manufacturers has historically been highly cyclical, with
    periods of investment followed by downturn. This market has been
    in a prolonged downturn since early 2006. Sales to semiconductor
    and electronics capital equipment manufacturers represented
    approximately 17% of total revenue in 2008, compared to 25% of
    total revenue in 2007.  
    Surface inspection customers are manufacturers of materials
    processed in a continuous fashion, such as metals, paper,
    non-wovens, plastics, and glass. These customers need
    sophisticated machine vision to detect and classify defects on
    the surfaces of those materials as they are being processed at
    high speeds. Surface inspection sales represented approximately
    15% of total revenue in 2008, compared to 13% of total revenue
    in 2007.    held-for-sale
   22




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Year ended December 31,2008


2007


2006Revenue


100
%


100
%


100
%Cost of revenue


28



29



27Gross margin


72



71



73Research, development, and engineering expenses


15



15



14Selling, general, and administrative expenses


47



44



40Operating income


10



12



19Nonoperating income


5



4



2Income from continuing operations before income tax expense


15



16



21Income tax expense on continuing operations


2



4



4Income from continuing operations


13



12



17Loss from operations of discontinued business, net of tax


2



-



-Net income


11
%


12
%


17
%   STOCK-BASED
    COMPENSATION
           23




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RESULTS OF
    OPERATIONS
  Year Ended
    December 31, 2008 Compared to Year Ended December 31,
    2007
  Revenue
    Discrete Factory
    Automation Market
    Semiconductor and
    Electronics Capital Equipment Market
    Surface
    Inspection Market
   24




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Product
    Revenue
    Service
    Revenue
    Gross
    Margin
    MVSD
    Margin
    SISD
    Margin
    Product
    Margin
    Service
    Margin
   25




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Operating
    Expenses
  Research,
    Development, and Engineering Expenses
        Selling, General,
    and Administrative Expenses
         26




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Restructuring
    Charge
      Total Amount


Incurred inExpected to be


Year EndedIncurred


December 31,
    2008One-time termination benefits

$
647


$
254Contract termination costs


340



-Other associated costs


513



4$
1,500


$
258       Balance at January 1, 2008

$
-Restructuring charges


258Cash payments


(51
)Balance at December 31, 2008

$
207
   Nonoperating
    Income (Expense)
   27




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Income Tax
    Expense on Continuing Operations
    true-up
  true-up
    Discontinued
    Operations
   28




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held-for-sale
  Year Ended
    December 31, 2007 Compared to Year Ended December 31,
    2006
  Correction of
    Prior-Period Misstatements Related to Unsubstantiated Orders in
    Japan
    Revenue
    Discrete Factory
    Automation Market
   29




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Semiconductor and
    Electronics Capital Equipment Market
  end-of-life
  Surface
    Inspection Market
    Product
    Revenue
  easier-to-use
  Service
    Revenue
    Gross
    Margin
    MVSD
    Margin
   30




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start-up
  SISD
    Margin
    Product
    Margin
    Service
    Margin
    Operating
    Expenses
  Research,
    Development, and Engineering Expenses
    Selling, General,
    and Administrative Expenses
       31




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Nonoperating
    Income (Expense)
        Income Tax
    Expense from Continuing Operations
  true-up
  true-up
   32




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Discontinued
    Operations
    held-for-sale
  LIQUIDITY AND
    CAPITAL RESOURCES
       33




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##### Table of Contents



VenrockLimited


InventoryPartnership


PurchaseYear Ended December
    31,

Interest


Commitments


Leases


Total2009

$
1,012


$
5,877


$
6,050


$
12,9392010


-



-



2,982



2,9822011


-



-



1,609



1,6092012


-



-



1,234



1,2342013


-



-



824



824Thereafter


-



-



1,285



1,285$
1,012


$
5,877


$
13,984


$
20,873       Stock Repurchase
    Program
    Rule 10b5-1 Rule 10b5-1
      Dividends
   34




---



##### Table of Contents



Acquisitions
    Derivative
    Instruments
    OFF-BALANCE SHEET
    ARRANGEMENTS
    CRITICAL
    ACCOUNTING POLICIES AND ESTIMATES
    Revenue
    Recognition
     35




---



##### Table of Contents



No. 97-2, SOP No. 98-9, SOP 97-2,
  Investments
          other-than-temporary other-than-temporary, other-than-temporary
 36




---



##### Table of Contents



Accounts
    Receivable
    Inventories
    Long-lived
    Assets
     37




---



##### Table of Contents



Warranty
    Obligations
    Contingencies
   38




---



##### Table of Contents



Stock-Based
    Compensation
    Income
    Taxes
        Derivative
    Instruments
      NEW
    PRONOUNCEMENTS
  FASB Statement
    No. 141R, Business Combinations
   39




---



##### Table of Contents



FASB Statement
    No. 157, Fair Value Measurements
  No. 157-2, No. 157-2,
  FASB Statement
    No. 161, Disclosures about Derivative Instruments and
    Hedging Activities, an amendment of FASB Statement
    No. 133
    ITEM 7A:
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  Foreign Currency
    Risk
      
    transactional currency/functional currency exchange rate
    exposures from transactions that are denominated in currencies
    other than the functional currency of the subsidiary (for
    example, a Japanese Yen receivable on the Companys Irish
    subsidiarys books for which the functional currency is the
    Euro), and
    functional currency/reporting currency exchange rate exposures
    from transactions that are denominated in currencies other than
    the U.S. Dollar, which is the reporting currency of the
    Company. 40




---



##### Table of Contents



Interest Rate
    Risk
  available-for-sale
     41




---



##### Table of Contents



Valuation of securities given


No change in


Valuation of securities givenType of security


an interest rate decrease


interest rates


an interest rate increase(100 BP)


(50 BP)





50 BP


100 BPMunicipal Bonds


$85,888


$86,184


$86,480


$86,776


$87,072   Other Market
    Risks
          other-than-temporary
 42




---



##### 



ITEM 8:
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA   INDEX TO
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
   
 Consolidated Financial Statements:Report of Independent Accountants


44-45Consolidated Statements of Operations for the
    Years Ended December 31, 2008, 2007, and 2006


46Consolidated Balance Sheets as of
    December 31, 2008 and 2007


47Consolidated Statements of Shareholders
    Equity for the Years Ended December 31, 2008, 2007, and
    2006


48Consolidated Statements of Cash Flows for the
    Years Ended December 31, 2008, 2007, and 2006


49Notes to the Consolidated Financial Statements


50Selected Quarterly Financial Data (unaudited)


77Financial Statement Schedule:Report of Independent Accountants on the
    Financial Statement Schedule


78-79Schedule II  Valuation and
    Qualifying Accounts for the Years Ended December 31, 2008,
    2007, and 2006


80   43




---



##### Table of Contents



COGNEX
    CORPORATION - REPORT OF INDEPENDENT REGISTERED PUBLIC
    ACCOUNTING FIRM ON FINANCIAL STATEMENTS   To the Board of Directors and Shareholders of Cognex
    Corporation:
            
    44




---



##### Table of Contents



COGNEX
    CORPORATION - REPORT OF INDEPENDENT REGISTERED PUBLIC
    ACCOUNTING FIRM ON FINANCIAL STATEMENTS
   To the Board of Directors and Shareholders of Cognex
    Corporation:
           
      45




---



##### Table of Contents



COGNEX
    CORPORATION - CONSOLIDATED STATEMENTS OF
    OPERATIONS  Year Ended December 31,2008


2007


2006(In thousands, except per share amounts)RevenueProduct

$
223,243


$
201,660


$
214,832Service


19,437



24,023



23,486242,680



225,683



238,318Cost of revenueProduct


56,423



49,945



50,213Service


12,004



14,405



14,62568,427



64,350



64,838Gross marginProduct


166,820



151,715



164,619Service


7,433



9,618



8,861174,253



161,333



173,480Research, development, and engineering expenses


36,262



33,384



32,332Selling, general, and administrative expenses


112,629



99,813



96,675Restructuring charge (Note 16)


258



-



-Operating income


25,104



28,136



44,473Foreign currency gain (loss)


2,497



279



(333
)Investment income


7,101



7,908



7,291Other income (expense)


666



(201
)


(854
)Income from continuing operations before income tax expense


35,368



36,122



50,577Income tax expense on continuing operations


4,869



8,575



10,549Income from continuing operations


30,499



27,547



40,028Loss from operations of discontinued business, net of tax
    (Note 19)


(3,224
)


(648
)


(173
)Net income

$
27,275


$
26,899


$
39,855Basic earnings per weighted-average common and common-equivalent
    share:Income from continuing operations

$
0.74


$
0.63


$
0.88Loss from discontinued operations

$
(0.08
)

$
(0.01
)

$
(0.01
)Net income

$
0.66


$
0.62


$
0.87Diluted earnings per weighted-average common and
    common-equivalent share:Income from continuing operations

$
0.73


$
0.63


$
0.86Loss from discontinued operations

$
(0.07
)

$
(0.02
)

$
(0.01
)Net income

$
0.66


$
0.61


$
0.85Weighted-average common and common-equivalent shares outstanding:Basic


41,437



43,725



45,559Diluted


41,554



44,063



46,648Cash dividends per common share

$
0.47


$
0.34


$
0.33    46




---



##### Table of Contents



COGNEX
    CORPORATION  CONSOLIDATED BALANCE SHEETS  December 31,2008


2007(In thousands)ASSETSCurrent assets:Cash and cash equivalents

$
127,138


$
104,144Short-term investments


52,559



113,179Accounts receivable, less reserves of $1,290 and $1,317 in 2008
    and 2007, respectively


30,510



38,900Inventories


25,063



27,394Deferred income taxes


10,231



7,504Prepaid expenses and other current assets


18,923



16,361Held for sale assets (Note 19)


-



5,919Total current assets


264,424



313,401Long-term investments


41,389



50,565Property, plant, and equipment, net


27,764



26,636Deferred income taxes


17,673



19,750Intangible assets, net


31,278



39,475Goodwill


80,765



81,032Other assets


10,754



8,687$
474,047


$
539,546LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable

$
6,780


$
7,245Accrued expenses


21,855



20,098Accrued income taxes


2,986



3,242Deferred revenue and customer deposits


19,429



13,288Total current liabilities


51,050



43,873Reserve for income taxes


9,922



19,308Commitments and contingenciesShareholders equity:Common stock, $.002 par value Authorized: 140,000 shares, issued: 39,655 and
    43,347 shares in 2008 and 2007, respectively


79



87Additional paid-in capital


73,280



140,943Retained earnings


345,225



337,231Accumulated other comprehensive loss


(5,509
)


(1,896
)Total shareholders equity


413,075



476,365$
474,047


$
539,546    47




---



##### Table of Contents



COGNEX
    CORPORATION-CONSOLIDATED STATEMENTS OF SHAREHOLDERS
    EQUITY  AccumulatedAdditional





Other





TotalCommon Stock


Paid-in


Retained


Comprehensive


Comprehensive


Shareholders(In thousands)

Shares


Par Value


Capital


Earnings


Loss


Income


EquityBalance at December 31, 2005


47,171


$
94


$
216,031


$
304,454


$
(14,058
)





$
506,521Issuance of common stock under stock option, stock purchase, and
    other plans


513



2



10,357



-



-



-



10,359Stock-based compensation expense


-



-



13,624



-



-



-



13,624Excess tax benefit from stock option exercises


-



-



1,413



-



-



-



1,413Repurchase of common stock


(3,281
)


(7
)


(86,289
)


-



-



-



(86,296
)Payment of dividends


-



-



-



(15,058
)


-



-



(15,058
)Comprehensive income:Net income


-



-



-



39,855



-


$
39,855



39,855Gains on long-term intercompany loans, net of losses on currency
    swaps, net of tax of $139


-



-



-



-



236



236



236Net unrealized gain on available-for-sale investments, net of
    tax of $330


-



-



-



-



562



562



562Foreign currency translation adjustment


-



-



-



-



2,634



2,634



2,634Comprehensive income





















$
43,287Balance at December 31, 2006


44,403


$
89


$
155,136


$
329,251


$
(10,626
)





$
473,850Issuance of common stock under stock option and stock purchase
    plans


374



1



6,818



-



-



-



6,819Stock-based compensation expense


-



-



11,715



-



-



-



11,715Excess tax benefit from stock option exercises


-



-



241



-



-



-



241Reduction of previously-recognized tax benefit from stock option
    exercises


-



-



(307
)


-



-



-



(307
)Repurchase of common stock


(1,430
)


(3
)


(32,660
)


-



-







(32,663
)Payment of dividends


-



-



-



(14,898
)


-



-



(14,898
)Reduction in retained earnings related to the adoption of
    FIN 48 (Note 15)


-



-



-



(4,021
)


-



-



(4,021
)Comprehensive income:Net income


-



-



-



26,899



-


$
26,899



26,899Gains on long-term intercompany loans, net of losses on currency
    swaps, net of tax of $321


-



-



-



-



546



546



546Net unrealized gain on available-for-sale investments, net of
    tax of $245


-



-



-



-



416



416



416Foreign currency translation adjustment


-



-



-



-



7,768



7,768



7,768Comprehensive income





















$
35,629Balance at December 31, 2007


43,347


$
87


$
140,943


$
337,231


$
(1,896
)





$
476,365Issuance of common stock under stock option and stock purchase
    plans


927



2



15,050



-



-



-



15,052Stock-based compensation expense


-



-



10,231



-



-



-



10,231Excess tax benefit from stock option exercises


-



-



1,671



-



-



-



1,671Reduction of tax benefit for research and development credits


-



-



(1,656
)


-



-



-



(1,656
)Repurchase of common stock


(4,619
)


(10
)


(92,959
)


-



-



-



(92,969
)Payment of dividends


-



-



-



(19,281
)


-



-



(19,281
)Comprehensive income:Net income


-



-



-



27,275



-


$
27,275



27,275Net unrealized loss on available-for-sale investments, net of
    tax of $102


-



-



-



-



175



175



175Foreign currency translation adjustment, net of tax expense of
    $649


-



-



-



-



(3,788
)


(3,788
)


(3,788
)Comprehensive income





















$
(23,662
)Balance at December 31, 2008


39,655


$
79


$
73,280


$
345,225


$
(5,509
)





$
413,075     48




---



##### Table of Contents



COGNEX
    CORPORATION - CONSOLIDATED STATEMENTS OF CASH
    FLOWS  Year Ended December 31,2008


2007


2006(In thousands)Cash flows from operating activities:Net income

$
27,275


$
26,899


$
39,855Adjustments to reconcile net income to net cash provided by
    operations:Impairment loss related to discontinued business (Note 19)


2,987



-



-Intangible asset impairment charge (Note 7)


1,500



-



-Stock-based compensation expense


10,231



11,715



13,624Depreciation of property, plant, and equipment


4,742



4,271



4,285Amortization of intangible assets


6,633



5,648



5,884Amortization of premiums or discounts on investments


1,320



1,439



1,498Provision for excess and obsolete inventory


2,779



4,672



1,076Reversal of accrued inventory purchase commitments


-



(1,400)



-Excess tax benefit from stock option exercises


(1,671)



(241)



(1,413)Deferred income tax benefit


(441)



(5,460)



(45)Changes in operating assets and liabilities:Accounts receivable


8,551



3,198



4,216Inventories


(959)



124



(11,254)Accrued expenses


2,405



(8,122)



(3,662)Income taxes


(10,476)



4,118



(3,249)Deferred revenue and customer deposits


6,142



5,458



87Other


(2,081)



(3,846)



(2,423)Net cash provided by operating activities


58,937



48,473



48,479Cash flows from investing activities:Purchase of investments


(120,622)



(277,876)



(481,086)Maturity and sale of investments


189,375



292,213



541,023Purchase of property, plant, and equipment


(6,012)



(4,635)



(4,224)Cash paid for business acquisitions, net of cash acquired
    (Note 19)


(1,000)



(1,002)



(3,188)Cash received related to discontinued business (Note 19)


2,797



-



-Net cash provided by investing activities


64,538



8,700



52,525Cash flows from financing activities:Issuance of common stock under stock option and stock purchase
    plans


15,052



6,819



10,359Repurchase of common stock


(92,969)



(32,663)



(86,296)Payment of dividends


(19,281)



(14,898)



(15,058)Excess tax benefit from stock option exercises


1,671



241



1,413Net cash used in financing activities


(95,527)



(40,501)



(89,582)Effect of foreign exchange rate changes on cash


(4,954)



111



3,083Net increase in cash and cash equivalents


22,994



16,783



14,505Cash and cash equivalents at beginning of year


104,144



87,361



72,856Cash and cash equivalents at end of year

$
127,138


$
104,144


$
87,361    49




---



##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  NOTE 1:
    Summary of
    Significant Accounting Policies    Nature of
    Operations
    Use of Estimates
    in the Preparation of Financial Statements
    Basis of
    Consolidation
    Foreign
    Currency
    Cash, Cash
    Equivalents, and Investments
       50




---



##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 1:
    Summary of
    Significant Accounting Policies (continued)  Accounts
    Receivable
      Inventories
  first-in,
      Property, Plant,
    and Equipment
    Intangible
    Assets
   51




---



##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 1:
    Summary of
    Significant Accounting Policies (continued)    Goodwill
    Warranty
    Obligations
    Contingencies
    Revenue
    Recognition
  No. 97-2, SOP No. 98-9, SOP 97-2,
     52




---



##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 1:
    Summary of
    Significant Accounting Policies (continued)        Research and
    Development
    Advertising
    Costs
    Stock-Based
    Compensation
     53




---



##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 1:
    Summary of
    Significant Accounting Policies (continued)  Taxes
          Net Income Per
    Share
    Comprehensive
    Income (Loss)
   54




---



##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 1:
    Summary of
    Significant Accounting Policies (continued)  Concentrations of
    Risk
        Derivative
    Instruments
      NOTE 2:
    New
    Pronouncements  FASB Statement
    No. 141R, Business Combinations
   55




---



##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 2:
    New
    Pronouncements (continued)   FASB Statement
    No. 157, Fair Value Measurements
  No. 157-2, No. 157-2,
  FASB Statement
    No. 161, Disclosures about Derivative Instruments and
    Hedging Activities, an amendment of FASB Statement
    No. 133
    NOTE 3:
    Foreign Currency
    Risk Management       56




---



##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
  NOTE 4:
    Cash, Cash
    Equivalents, and Investments    December 31,2008


2007Cash

$
124,339


$
104,144Cash equivalents


2,799



-Cash and cash equivalents


127,138



104,144Municipal bonds


52,559



113,179Short-term investments


52,559



113,179Municipal bonds


33,921



43,097Limited partnership interest (accounted for using cost method)


7,468



7,468Long-term investments


41,389



50,565$
221,086


$
267,888       Gross


GrossAmortized


Unrealized


UnrealizedCost


Gains


Losses


Fair ValueShort-term municipal bonds

$
52,262


$
301


$
(4
)

$
52,559Long-term municipal bonds


33,544



383



(6
)


33,921$
85,806


$
684


$
(10
)

$
86,480        57




---



##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 4:
    Cash, Cash
    Equivalents, and Investments (continued)      SignificantOther

SignificantObservable

UnobservableInputs (Level 2)

Inputs (Level 3)

TotalMunicipal bond investments

$
84,480


$
2,000


$
86,480      58




---



##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
  NOTE 5:
    Inventories    December 31,2008


2007Raw materials

$
14,722


$
13,005Work-in-process


976



1,336Finished goods


9,365



13,053$
25,063


$
27,394   NOTE 6:
    Property, Plant,
    and Equipment    December 31,2008


2007Land

$
3,951


$
3,951Buildings


18,371



18,371Building improvements


8,183



6,918Leasehold improvements


3,945



2,706Computer hardware and software


22,619



24,058Manufacturing test equipment


9,169



9,245Furniture and fixtures


3,889



4,81870,127



70,067Less: accumulated depreciation


(42,363
)


(43,431
)$
27,764


$
26,636      59




---



##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
  NOTE 7:
    Intangible
    Assets    Gross





NetCarrying


Accumulated


CarryingValue


Amortization


ValueDecember 31, 2008Distribution networks

$
38,060


$
12,049


$
26,011Customer contracts and relationships


13,300



9,556



3,744Completed technologies


3,680



2,249



1,431Other


1,110



1,018



92$
56,150


$
24,872


$
31,278December 31, 2007Distribution networks

$
38,060


$
8,763


$
29,297Customer contracts and relationships


13,629



5,865



7,764Completed technologies


3,680



1,636



2,044Other


1,110



740



370$
56,479


$
17,004


$
39,475   fully-amortized
  Year Ended December 31,

Amount2009

$
5,2022010


5,1102011


4,1972012


3,7952013


3,425Thereafter


9,549$
31,278      60




---



##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 7:
    Intangible Assets
    (continued)    NOTE 8:
    Goodwill      MVSD


SISD


ConsolidatedBalance at December 31, 2006

$
77,429


$
2,833


$
80,262IRS Settlement related to DVT acquisition


179



-



179Foreign currency exchange rate changes


291



300



591Balance at December 31, 2007

$
77,899


$
3,133


$
81,032Foreign currency exchange rate changes


(132
)


(135
)


(267
)Balance at December 31, 2008

$
77,767


$
2,998


$
80,765      NOTE 9:
    Accrued
    Expenses    December 31,2008


2007Salaries, commissions, and payroll taxes

$
4,355


$
4,027Vacation


4,232



3,661Consumption taxes


3,606



3,028Japan retirement allowance


2,813



1,996Warranty obligations


1,657



1,462Company bonuses


1,429



1,309AssistWare contingent payment (Note 19)


-



1,000Other


3,763



3,615$
21,855


$
20,098  61




---



##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 9:
    Accrued Expenses
    (continued)    Balance at December 31, 2006

$
1,387Provisions for warranties issued during the period


2,164Fulfillment of warranty obligations


(2,176
)Foreign exchange rate changes


87Balance at December 31, 2007

$
1,462Provisions for warranties issued during the period


1,828Fulfillment of warranty obligations


(1,593
)Foreign exchange rate changes


(40
)Balance at December 31, 2008

$
1,657   NOTE 10:
    Commitments and
    Contingencies  Commitments
      Year Ended December 31,

Amount2009

$
6,0502010


2,9822011


1,6092012


1,2342013


824Thereafter


1,285$
13,984    62




---



##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 10:
    Commitments and
    Contingencies (continued)    Year Ended December 31,

Amount2009

$
5692010


5562011


5722012


5722013


306Thereafter


1,120$
3,695   Contingencies
  and/or patent-in-suit, patent-at-issue
    and/or
  and/or
 63




---



##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 10:
    Commitments and
    Contingencies (continued)    NOTE 11:
    Indemnification
    Provisions        NOTE 12:
    Shareholders
    Equity  Preferred Stock
    Common Stock
    Shareholder Rights Plan
   64




---



##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 12:
    Shareholders
    Equity (continued)  Form 8-A.
    Stock Repurchase Program
    Rule 10b5-1 Rule 10b5-1
      Stock Option Plans
   65




---



##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 12:
    Shareholders
    Equity (continued)        Weighted-AverageWeighted-


Remaining


AggregateAverage


Contractual


IntrinsicShares


Exercise


Term


Value(in thousands)


Price


(in years)


(in thousands)Outstanding at December 31, 2007


10,940


$
25.50Granted at market value


2,418



20.10Exercised


(917
)


16.22Forfeited or Expired


(1,035
)


25.51Outstanding at December 31, 2008


11,406


$
25.10



6.10


$
631Exercisable at December 31, 2008


7,143


$
26.79



4.64


$
631   Employee Stock Purchase Plan
      NOTE 13:
    Stock-Based
    Compensation   66




---



##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 13:
    Stock-Based
    Compensation (continued)    Year Ended December 31,2008


2007


2006Risk-free rate


3.9
%


4.9
%


4.6
%Expected dividend yield


1.7
%


1.5
%


1.1
%Expected volatility


42
%


40
%


45
%Expected term (in years)


6.0



5.4



4.1   Risk-free rate
   Expected dividend yield
   Expected volatility
   Expected term
        67




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 13:
    Stock-Based
    Compensation (continued)    Year Ended December 31,2008


2007


2006Product cost of revenue

$
599


$
624


$
725Service cost of revenue


517



591



871Research, development, and engineering


3,067



3,239



3,627Selling, general, and administrative


6,048



7,261



8,401$
10,231


$
11,715


$
13,624     NOTE 14:
    Employee Savings
    Plan    NOTE 15:
    Income
    Taxes      Year Ended December 31,2008


2007


2006Current:Federal

$
2,047


$
10,343


$
9,816State


1,227



1,341



246Foreign


5,356



5,381



5,6748,630



17,065



15,736Deferred:Federal


(2,878
)


(7,768
)


(4,847
)State


(518
)


(660
)


(101
)Foreign


(365
)


(62
)


(239
)(3,761
)


(8,490
)


(5,187
)$
4,869


$
8,575


$
10,549  68




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 15:
    Income Taxes
    (continued)    Year Ended December 31,2008


2007


2006Income tax provision at federal statutory rate


35
%


35
%


35
%State income taxes, net of federal benefit


2



2



3Tax-exempt investment income


(3
)


(6
)


(4
)Foreign tax rate differential


(10
)


(13
)


(11
)Discrete tax events


(11
)


5



(4
)Other


1



1



2Provision for income taxes


14
%


24
%


21
%     true-up
  true-up
   69




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 15:
    Income Taxes
    (continued)    Balance of gross FIN 48 liabilities at
    December 31, 2007

$
16,401Gross amounts of increases in unrecognized tax benefits as a
    result of tax positions taken in prior periods


2,466Gross amounts of increases in unrecognized tax benefits as a
    result of tax positions taken in the current period


541Gross amounts of decreases in unrecognized tax benefits as a
    result of tax positions taken in prior periods that are
    effectively settled


(3,442
)Gross amounts of decreases in unrecognized tax benefits relating
    to settlements with taxing authorities


(4,891
)Gross amounts of decreases in unrecognized tax benefits as a
    result of the expiration of the applicable statute of limitations


(2,904
)Balance of gross FIN 48 liabilities at
    December 31, 2008

$
8,171      70




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 15:
    Income Taxes
    (continued)    December 31,2008


2007Current deferred tax assets:Inventory and revenue related

$
8,167


$
5,276Federal capital loss carryforward


-



671Bonus, commission, and other compensation


1,373



1,078Other


691



1,150Gross current deferred tax assets


10,231



8,175Valuation allowance


-



(671
)Net current deferred tax assets

$
10,231


$
7,504Noncurrent deferred tax assets:Stock-based compensation expense

$
11,435


$
8,476Federal and state tax credit carryforwards


9,356



13,395Acquired completed technologies and other intangible assets


2,626



2,989Depreciation


1,750



1,632Correlative tax relief and deferred interest related to
    FIN 48 liabilities


1,733



4,296Unrealized investment gains and losses


1,102



1,389Acquired in-process technology


551



682Capital loss carryforward


373



-Other


1,107



897Gross noncurrent deferred tax assets


30,033



33,756Noncurrent deferred tax liabilities:Nondeductible intangible assets


(10,712
)


(13,274
)Other


(1,275
)


(732
)Gross noncurrent deferred tax liabilities


(11,987
)


(14,006
)Valuation allowance


(373
)


-Net noncurrent deferred tax assets

$
17,673


$
19,750        71




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 15:
    Income Taxes
    (continued)        Non-U.S. income
    NOTE 16:
    Restructuring
    Charge      Total Amount


Incurred InExpected to


Year Endedbe Incurred


December 31, 2008One-time termination benefits

$
647


$
254Contract termination costs


340



-Other associated costs


513



4$
1,500


$
258    72




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 16:
    Restructuring
    Charge (continued)      Balance at January 1, 2008

$
-Restructuring charges


258Cash payments


(51
)Balance at December 31, 2008

$
207   NOTE 17:
    Weighted Average
    Shares    Year Ended December 31,2008


2007


2006Basic weighted-average common shares outstanding


41,437



43,725



45,559Effect of dilutive stock options


117



338



1,089Diluted weighted-average common and common-equivalent shares
    outstanding


41,554



44,063



46,648     NOTE 18:
    Segment and
    Geographic Information   73




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 18:
    Segment and
    Geographic Information (continued)    ReconcilingMVSD


SISD


Items


ConsolidatedYear Ended December 31, 2008Product revenue

$
197,211


$
26,032



-


$
223,243Service revenue


9,375



10,062



-



19,437Depreciation and amortization


12,234



247


$
394



12,875Goodwill and intangibles


109,045



2,998



-



112,043Operating income


42,624



4,078



(21,598
)


25,104Year Ended December 31, 2007Product revenue

$
182,755


$
18,905



-


$
201,660Service revenue


13,357



10,666



-



24,023Depreciation and amortization


9,310



252


$
357



9,919Goodwill and intangibles


117,374



3,133



-



120,507Operating income


49,736



1,927



(23,527
)


28,136Year Ended December 31, 2006Product revenue

$
195,097


$
19,735



-


$
214,832Service revenue


12,978



10,508



-



23,486Depreciation and amortization


9,639



260


$
270



10,169Goodwill and intangibles


122,113



2,833



-



124,946Operating income


65,810



3,380



(24,717
)


44,473         United States


Europe


Japan


Other


ConsolidatedYear Ended December 31, 2008Product revenue

$
66,172


$
82,024


$
48,508


$
26,539


$
223,243Service revenue


7,469



6,468



4,328



1,172



19,437Long-lived assets


127,061



20,799



2,447



254



150,561Year Ended December 31, 2007Product revenue

$
68,487


$
65,835


$
47,535


$
19,803


$
201,660Service revenue


10,159



7,187



4,783



1,894



24,023Long-lived assets


134,766



18,999



1,894



171



155,830Year Ended December 31, 2006Product revenue

$
73,092


$
60,162


$
61,494


$
20,084


$
214,832Service revenue


10,348



6,502



5,430



1,206



23,486Long-lived assets


139,261



11,479



1,820



108



152,668    74




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
  NOTE 19:
    Acquisition of
    AssistWare Technology, Inc. and Sale of Lane Departure Warning
    Business      Weighted-AverageEstimated


Amortization PeriodFair Value


(in years)Accounts receivable

$
58Inventories


29Prepaid expenses and other current assets


320Property, plant, and equipment


32Intangible assetsCustomer contract


140


3.5Customer relationships


100


9Completed technologies


100


5Goodwill


2,962Total assets acquired


3,741Accounts payable


280Accrued expenses


463Total liabilities assumed


743Total purchase price

$
2,998        75




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##### Table of Contents



COGNEX
    CORPORATION - NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
   NOTE 19:
    Acquisition of
    AssistWare Technology, Inc. and Sale of Lane Departure Warning
    Business (continued)    Inventories

$
85Prepaid expenses and other current assets


45Property, plant, and equipment, net


49Intangible assets


222Goodwill


5,756Valuation allowance


(2,987
)Total proceeds, net of costs to sell

$
3,170     NOTE 20:
    Dividends     76




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##### Table of Contents



COGNEX
    CORPORATION - SELECTED QUARTERLY FINANCIAL DATA
    (UNAUDITED)  Quarter EndedMarch 30,


June 29,


September 28,


December 31,2008


2008


2008


2008(In thousands, except per share amounts)Revenue

$
60,513


$
67,089


$
63,256


$
51,822Gross margin


43,458



48,064



45,848



36,883Operating income (loss)


8,003



10,726



7,987



(1,612
)Income from continuing operations


8,590



8,762



11,333



1,814Net income


8,475



5,653



11,333



1,814Basic income from continuing operations per share


0.20



0.21



0.27



0.05Diluted income from continuing operations per share


0.20



0.21



0.27



0.05Basic net income per share


0.20



0.13



0.27



0.05Diluted net income per share


0.20



0.13



0.27



0.05   Quarter EndedApril 1,


July 1,


September 30,


December 31,2007


2007


2007


2007(In thousands, except per share amounts)Revenue

$
50,927


$
54,742


$
54,743


$
65,271Gross margin


36,539



36,792



40,158



47,844Operating income


4,688



4,329



7,485



11,634Income from continuing operations


4,688



3,940



7,571



11,348Net income


4,635



3,827



7,343



11,094Basic income from continuing operations per share


0.11



0.09



0.17



0.26Diluted income from continuing operations per share


0.10



0.09



0.17



0.26Basic net income per share


0.10



0.09



0.17



0.26Diluted net income per share


0.10



0.09



0.17



0.25  77




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##### Table of Contents



COGNEX
    CORPORATION - REPORT OF INDEPENDENT ACCOUNTANTS ON
    FINANCIAL STATEMENT SCHEDULE   To the Board of
    Directors and Shareholders of Cognex Corporation:
  Form 10-K Form 10-K
  
    78




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##### Table of Contents



COGNEX
    CORPORATION - REPORT OF INDEPENDENT ACCOUNTANTS ON
    FINANCIAL STATEMENT SCHEDULE
   Report of
    Independent Registered Public Accounting Firm
    (Form 10-K)). (Form 10-K).
    
      79




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##### Table of Contents



COGNEX
    CORPORATION - SCHEDULE II - VALUATION AND
    QUALIFYING ACCOUNTS  AdditionsBalance at


Charged to


Charged








Balance atBeginning


Costs and


to Other








End ofDescription

of Period


Expenses


Accounts


Deductions


Other


Period(In thousands)Reserve for Uncollectible Accounts:2008

$
1,317


$
153


$
-


$
(77
) (a)

$
(103) (b)


$
1,2902007


1,662



34



-



(407
) (a)


28 (b)



1,3172006


2,370



200



-



(273
) (a)


(635) (b)



1,662   (a)
    
    Specific write-offs  80




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##### Table of Contents



ITEM 9: CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE   ITEM 9A: CONTROLS
    AND PROCEDURES  Disclosure
    Controls and Procedures
  Rules 13a-15 15d-15
  Managements
    Report on Internal Control over Financial Reporting
       81




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##### Table of Contents



Registered Public
    Accounting Firms Report on Internal Control Over Financial
    Reporting
    Internal Control 
    Integrated Framework
        Internal Control-Integrated Framework
    
    82




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##### Table of Contents



Changes in
    Internal Control Over Financial Reporting
   ITEM 9B: OTHER
    INFORMATION   83




---



##### Table of Contents



PART III ITEM 10: DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE  Form 10-K.
  www.cognex.com
 ITEM 11: EXECUTIVE
    COMPENSATION   ITEM 12: SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS      Number of securitiesremaining available for futureNumber of securities to be





issuance under equityissued upon exercise of


Weighted-average exercise


compensation plansoutstanding options, warrants,


price of outstanding options,


(excluding securities reflectedPlan Category

and rights


warrants, and rights


in column (a))(a)


(b)


(c)Equity compensation plans approved by shareholders


11,256,848 (1
)

$
25.15



2,051,515 (2
)Equity compensation plans not approved by shareholders


148,878 (3
)


21.20



7,110,000 (4
)11,405,726


$
25.10



9,161,515   (1)
    Includes shares to be issued upon exercise of outstanding
    options under the Companys 1991 Isys Controls, Inc.
    Long-Term Equity Incentive Plan, 1998 Stock Incentive Plan, 1998
    Non-Employee Director Stock Option Plan, and 2007 Stock Option
    and Incentive Plan. Does not include purchase rights accruing
    under the Employee Stock Purchase Plan (ESPP) because the
    purchase price (and therefore the number of shares to be
    purchased) will not be determined until the end of the purchase
    period.(2)
    Includes shares remaining available for future issuance under
    the Companys 2007 Stock Option and Incentive Plan.
    Includes 240,305 shares available for future issuance under
    the ESPP.(3)
    Includes shares to be issued upon the exercise of outstanding
    options under the Companys 2001 Interim General Stock
    Incentive Plan.(4)
    Includes shares remaining available for future issuance under
    the Companys 2001 General Stock Option Plan.   84




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##### Table of Contents



ITEM 13: CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE   ITEM 14: PRINCIPAL
    ACCOUNTANT FEES AND SERVICES   85




---



##### Table of Contents



PART IV ITEM 15: EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES    Form 10-K.
    Form 10-K.
      Form 10-K
 86




---



##### Table of Contents



SIGNATURES
      By:
    /s/  Robert
    J. Shillman   
    Signature

Title

Date/s/  Robert
    J. ShillmanRobert
    J. Shillman

Chief Executive Officer, President, and Chairman of the Board of
    Directors (principal executive officer)

February 17, 2009/s/  Richard
    A. MorinRichard
    A. Morin

Senior Vice President of Finance and Administration, Chief
    Financial Officer, and Treasurer (principal financial and
    accounting officer)

February 17, 2009/s/  Patrick
    AliasPatrick
    Alias

Director

February 17, 2009/s/  Jerald
    FishmanJerald
    Fishman

Director

February 17, 2009/s/  Theodor
    KrantzTheodor
    Krantz

Director

February 17, 2009/s/  Edward
    SmithEdward
    Smith

Director

February 17, 2009/s/  Anthony
    SunAnthony
    Sun

Director

February 17, 2009/s/  Reuben
    WassermanReuben
    Wasserman

Director

February 17, 2009  87




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##### Table of Contents



EXHIBIT INDEX
  EXHIBIT NUMBER3A


Restated Articles of Organization of Cognex Corporation
    effective June 27, 1989, as amended April 30, 1991,
    April 21, 1992, April 25, 1995, April 23, 1996,
    and May 8, 2000 (incorporated by reference to
    Exhibit 3A of Cognexs Annual Report on
    Form 10-K
    for the year ended December 31, 2007 [File
    No. 0-17869])3B


Articles of Amendment to the Articles of Organization of Cognex
    Corporation establishing Series E Junior Participating
    Preferred Stock (incorporated by reference to Exhibit 3.1
    to Cognexs Registration Statement on
    Form 8-A
    filed on December 5, 2008 [File
    No. 1-34218])3C


By-laws of Cognex Corporation, as amended and restated through
    November 21, 2007 (incorporated by reference to
    Exhibit 3B of Cognexs Annual Report on
    Form 10-K
    for the year ended December 31, 2007 [File
    No. 0-17869])3D


Amendment to By-laws of Cognex Corporation, dated March 1,
    2008 (incorporated by reference to Exhibit 3.1 of
    Cognexs Current Report on
    Form 8-K
    filed on March 3, 2008 [File
    No. 0-17869])4A


Specimen Certificate for Shares of Common Stock (incorporated by
    reference to Exhibit 4 to the Registration Statement on
    Form S-1
    [Registration
    No. 33-29020])4B


Shareholder Rights Agreement, dated December 4, 2008,
    between Cognex Corporation and National City Bank (incorporated
    by reference to Exhibit 4.1 to Cognexs Registration
    Statement on
    Form 8-A
    filed on December 5, 2008 [File
    No. 1-34218])10A*


1991 Isys Controls, Inc. Long-Term Equity Incentive Plan
    (incorporated by reference to Exhibit 4A to the
    Registration Statement on
    Form S-8
    [Registration
    No. 333-02151])10B*


Cognex Corporation 1998 Non-Employee Director Stock Option Plan
    (incorporated by reference to Exhibit 4.1 to the
    Registration Statement on
    Form S-8
    [Registration
    No. 333-60807])10C*


Amendment to Cognex Corporation 1998 Non-Employee Director Stock
    Option Plan, effective as of July 26, 2007 (incorporated by
    reference to Exhibit 10.1 of Cognexs Quarterly Report
    on
    Form 10-Q
    for the quarter ended September 30, 2007 [File
    No. 0-17869])10D*


Cognex Corporation 1998 Stock Incentive Plan (incorporated by
    reference to Exhibit 4.2 to the Registration Statement on
    Form S-8
    [Registration
    No. 333-60807])10E*


First Amendment to the Cognex Corporation 1998 Stock Incentive
    Plan (incorporated by reference to Exhibit 4.3 to the
    Registration Statement on
    Form S-8
    [Registration
    No. 333-60807])10F*


Second Amendment to the Cognex Corporation 1998 Stock Incentive
    Plan (incorporated by reference to Exhibit 10.3 of
    Cognexs Quarterly Report on
    Form 10-Q
    for the quarter ended July 2, 2006 [File
    No. 0-17869])10G*


Amendment to Cognex Corporation 1998 Stock Incentive Plan,
    effective as of July 26, 2007 (incorporated by reference to
    Exhibit 10.1 of Cognexs Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 2007 [File
    No. 0-17869])10H*


Cognex Corporation 2000 Employee Stock Purchase Plan
    (incorporated by reference to Exhibit 4 to the Registration
    Statement on
    Form S-8
    [Registration
    No. 333-44824])10I*


First Amendment to 2000 Employee Stock Purchase Plan
    (incorporated by reference to Exhibit 10.2 of Cognexs
    Quarterly Report on
    Form 10-Q
    for the quarter ended July 3, 2005 [File
    No. 0-17869]) 88




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##### Table of Contents



EXHIBIT NUMBER10J*


Cognex Corporation 2001 Interim General Stock Incentive Plan
    (incorporated by reference to Exhibit 4.1 to the
    Registration Statement on
    Form S-8
    [Registration
    No. 333-68158])10K*


Cognex Corporation 2001 General Stock Option Plan (incorporated
    by reference to Exhibit 1 to the Registration Statement on
    Form S-8
    [Registration
    No. 333-100709])10L*


Amendment to Cognex Corporation 2001 General Stock Option Plan,
    effective as of July 26, 2007 (incorporated by reference to
    Exhibit 10.1 of Cognexs Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 2007 [File
    No. 0-17869])10M*


Cognex Corporation 2007 Stock Option and Incentive Plan
    (incorporated by reference to Exhibit 1 to the
    Companys Proxy Statement for the Special Meeting in lieu
    of the 2007 Annual Meeting of Shareholders, filed on
    March 14, 2007 [File
    No. 0-17869])10N*


Form of Letter Agreement between Cognex Corporation and each of
    Robert J. Shillman, Patrick A. Alias, Jerald G. Fishman, Anthony
    Sun and Reuben Wasserman (incorporated by reference to
    Exhibit 10R of Cognexs Annual Report on
    Form 10-K
    for the year ended December 31, 2007 [File
    No. 0-17869])10O*


Form of Letter Agreement between Cognex Corporation and Eric A.
    Ceyrolle (incorporated by reference to Exhibit 10S of
    Cognexs Annual Report on
    Form 10-K
    for the year ended December 31, 2007 [File
    No. 0-17869])10P*


Form of Stock Option Agreement (Non-Qualified) under 1998 Stock
    Incentive Plan (incorporated by reference to Exhibit 10T of
    Cognexs Annual Report on
    Form 10-K
    for the year ended December 31, 2007 [File
    No. 0-17869])10Q*


Form of Stock Option Agreement (Non-Qualified) under 1998
    Non-Employee Director Stock Plan (incorporated by reference to
    Exhibit 10.2 of Cognexs Quarterly Report on
    Form 10-Q
    for the quarter ended October 3, 2004 [File
    No. 0-17869])10R*


Separation Agreement by and between Cognex Corporation and James
    F. Hoffmaster (incorporated by reference to Exhibit 10.1 of
    Cognexs Current Report on
    Form 8-K/A,
    filed on April 12, 2007 [File
    No. 0-17869])10S*


Supplemental Retirement and Deferred Compensation Plan effective
    April 1, 1995 (incorporated by reference to
    Exhibit 10P of Cognexs Annual Report on
    Form 10-K
    for the year ended December 31, 2004 [File
    No. 0-17869])10T*


Summary of Annual Bonus Program (filed herewith)10U*


Summary of Director Compensation (filed herewith)10V*


Form of Indemnification Agreement with each of the Directors of
    Cognex Corporation (incorporated by reference to
    Exhibit 10.1 of Cognexs Current Report on
    Form 8-K
    filed on March 3, 2008 [File
    No. 0-17869])10W*


Employment Agreement, dated June 17, 2008, by and between
    Cognex Corporation and Robert Willett (incorporated by reference
    to Exhibit 10.1 of Cognexs Current Report on
    Form 8-K
    filed on June 19, 2008 [File
    No. 0-17869])10X*


Amendment to Employment Agreement with Robert Willett, dated
    November 14, 2008 (filed herewith)10Y*


Form of Stock Option Agreement under 2007 Stock Option and
    Incentive Plan (incorporated by reference to Exhibit 10.2
    of Cognexs Quarterly Report on
    Form 10-Q
    for the quarter ended June 29, 2008 [File
    No. 0-17869])10Z*


Letter from the Company to Richard A. Morin regarding Stock
    Option Agreements (incorporated by reference to
    Exhibit 10.3 of Cognexs Quarterly Report on
    Form 10-Q
    for the quarter ended June 29, 2008 [File
    No. 0-17869])14


Code of Business Conduct and Ethics as amended March 12,
    2004 (incorporated by reference to Exhibit 14 of
    Cognexs Annual Report on
    Form 10-K
    for the year ended December 31, 2004 [File
    No. 0-17869]) 89




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##### Table of Contents



EXHIBIT NUMBER21


Subsidiaries of the registrant (filed herewith)23
.1

Consent of Grant Thornton LLP (filed herewith)23
.2

Consent of Ernst & Young LLP (filed herewith)31
.1

Certification of Chief Executive Officer (filed herewith)31
.2

Certification of Chief Financial Officer (filed herewith)32
.1

Certification pursuant to Section 906 of the Sarbanes-Oxley
    Act of 2002 (CEO) (furnished herewith)32
.2

Certification pursuant to Section 906 of the Sarbanes-Oxley
    Act of 2002 (CFO) (furnished herewith)* Indicates management contract or compensatory plan or
    arrangement  90