Tuesday, October 20, 2009

Microvision: Take Over Target (Part 1)

This is a subject that I bring-up from time to time… because it is in the realm of possibilities for any company that has a superior product in a huge market, the size of what’s out there for a quality PicoP display engines.

So, here we go with our musing two days before the 3rd Qtr conference call that was announced this morning and is set for Thursday after the market close… on October 22nd, 2009.

There are possibly four companies that could greatly benefit from the "buyout" of Microvision at such humbled stock prices like $5.48 today. The reason I say “humbled” is because a few years ago, in the year 2000, Microvision stock [NASDAQ: MVIS] traded as high as $63 dollars.  Of course you could argue that it’s the “market cap” that counts and not just the share price. You are right, and we will let you use that when you come to the table to negotiate the price.

With so much money now freed-up in the financial markets [at so low interest rates] it is tempting for the established [large] companies to gobble –up small competitors that threaten their turf. And Microvision is a major threat for sure to those that came to the Pico projection market with inferior technology that consumer has more or less ignored.

Here’s the line-up of potential suitors, some gentlemanly and the others not…

TEXAS INSTRUMENTS (TI):
TI has finally realized that the scaled-down DLP [Pico projector] still runs too hot, is noisy, requires huge power, is way too big for the small screen size, requires constant manual focus and is too expensive to make. TI sells their DLP chip [for the classic DLP projectors] for close to a thousand dollar. No matter how much cheaper they make their scaled down DLP chip [or sell for lower margins] the cost will still be over a hundred dollars. Not only that, TI will be cannibalizing their classic DLP projector chip, in one form or the other, to capture the Pico projector market from the likes of Microvision [with a much cheaper 2D MEMS and laser based technology].

TI and its technology partners will bring a LED/DLP based Pico projector and compete in the standalone market. However, there will always be the issue of "manual focus", "image size", “power consumption”, “unit size” and "image quality". And these issues become very significant when you consider the embedded market for cell phones and smartphones.

In the long run, TI will find it cheaper to [hostile] takeover Microvision rather than let-go the most profitable and huge Pico projector market and also risk the loss of revenue stream from their classic DLP chips. Over time, I would think much of everything done by a DLP chip could be done with a PicoP derivative. Would TI sit on their hands while their DLP cash cow suffered massive market share erosion to PicoP?

No way!!!

MOTOROLA (MOT):
On the other hand you have MOT desperate for new technology to jump start their handset business. Especially now, with the spin-off of the handset division still on the books, I am sure MOT [or the new buyer in the future] would love to have the PicoP display engine business to themselves and be the gate keeper to the embedded Pico projector market.

Please note…

[On March 26, 2008, Motorola's board of directors approved a split into two different publicly traded companies. This came after talk of selling the handset division to another corporation. These new companies would comprise the business units of the current Motorola Mobile Devices and Motorola Broadband & Mobility Solutions. Originally it was expected that this action would be approved by regulatory bodies and complete by mid-2009, but the split has since been indefinitely delayed due to company restructuring problems and the 2008-2009 extreme economic downturn.]

But what about Nokia, Sony and the other cell phone OEMs? Would they get in the bidding if PicoP became the defacto standard for the embedded market? If I am the CEO at Nokia, I don't want to be writing checks to MOT [or the new buyer] for huge quantities of PicoP display engines?

CORNING (GLW):
There are some speculations about Corning as the potential buyer of Microvision.

The idea is not far-fetched. However, it is unlikely. Corning is not in the habit of getting involved with an army of supply chain vendors of components and services and manufacturing OEMs infrastructure. Corning does well with what they do… because they run a tight ship and control quality thru vertical integration.

But, who knows? Strange things happen in the technology-land these days!!!

APPLE (AAPL):
Apple has to maintain a healthy double digit growth rate to even think about maintaining their $170B market valuation. If they are the brilliant innovators of [consumer] tech then they already know that the projection of video content is the future. Microvision’s PicoP projector will be a disruptive addition to the personal electronics industry within the next year or two. Right now its eye candy to implement a projector into an iPod or an iPhone since it requires add-on attachments to actually make it work; you might as well buy a micro projector.

But I must say that the embedded version of the PicoP is definitely an innovative technology and that’s what Apple usually wants. Apple [and Steve Jobs] tends to want and see what consumers want, then refine it and make it desirable to have. My best guess is that Apple won’t incorporate projectors into iPods [and iPhones] for at least for a while. When the PicoP technology develops more and proves to be a little more portable, Apple may just step in.

Apple has over $30B in cash under Steve Jobs and he is known to lock-up the “best” technology and make it his own… especially when such a technology like PicoP projectors can make his star performers [iPod and iPhone] a second rate product… because of lack of incorporating an obvious innovation to its mobile product line. It may take a year or two, but it will happen… in some way or form. One thing’s for sure though, Apple knows what they’re doing in the interest of their customers.

But the stakes are huge for a number of companies [like Sony, Nokia, Epson, Samsung, LG Electronics, etc.], so it is going to be very interesting to see how this plays out.

Here’s the latest update to Microvision news that is sure to stir-up the bees hive abuzz…

After three years of hard work, anxious wait for green lasers and sweating it each passing day, and 115 issued patents later, the world’s first laser based PicoP projector was commercially launched on September 15th, 2009.

Not only that, another announcement was made [on 10/8/2009] of a major OEM purchase order as a major milestone accomplished in the history of Microvision. The stakeholders of Microvision [investors, partners and consumers] can finally take comfort in this announcement as a milestone that…

“…validates the performance and quality of our first laser projector offering. On the heels of announcing our first shipments of the SHOWwx laser pico projector, and receiving the purchase order from an international distributor, this is another significant milestone in our go-to-market strategy.” ... Alex Tokman, CEO of Microvision.

We are truly at the turning point in the history of Microvision, that some may call the “validation” phase. Because, that’s what the commercial release and the two purchase orders from global consumer electronic OEMs represent as …

• Validation of Microvision’s laser based PicoP display engine technology, its quality, its reliability, and a viable commercial fabrication & production milestone.

• Validation of performance and quality of PicoP display engine at the core of the world’s first laser based PicoP projector SHOWwx.

• Validation of Corning's green laser technology, its reliability, and a viable commercial fabrication & production milestone.

• Validation of technical and performance superiority of laser based PicoP projector as compared to other two technologies on the market… DLP/LED from Texas Instruments and LcoS/LED from 3M.

By the end of 4th quarter this year, we will have much more visibility and better indication of where Microvision is headed.

Here’s the link to Microvision’s best…

http://www.microvision.com/displayground/
[Click on “New ways to see” post]
http://www.microvision.com/displayground/?m=200908

In closing, I must emphasize one more point…

“Aside from Pico projectors, so far, no new “must have” gadget has appeared, unlike previous years when devices like Sony Corp's PlayStation 3; Nintendo's Wii; or Sirius satellite radios and myriad of digital cameras were launched to woo the electronic gadget shoppers.”

"Smartphones are the exception to the above statement. However, smartphones are all about features… and what’s more desirable, as a feature in a smartphone, than a quality PicoP projector as an accessory or as built-in."

Well, the pot of honey has been sighted and I’m sure there’s a “Bear” lurking in the PicoP jungle.

Stay tuned and we will keep a “watch-on” for you.

Anant Goel
http://www.wealthbyoptions.com/