Monday, January 11, 2010

Microvision: Perfect Storm CES 2010

These may sound like harsh words coming from one of the very staunch supporters of Microvision team. However, they need to be said at this juncture...

What we have seen over the past 48 hours is the “perfect storm” brewing in the future of Microvision. It started with Asia Optical making public comments [as perceived] in the media about TI having the best pico solution for embedded applications. It picked-up more gale force after the in-house staged CEO interview where Alex indicated more delays and future uncertainties. It became a perfect storm of hurricane force magnitude over the PC Magazine review of SHOWwx.

Individually these negative issues are easy to deal with because they have a reasonable explanation... and as such may or may not have an impact on the MVIS share price in the short term. However, collectively they are the recipe for a “perfect storm” and may precipitate an investor sell-off first and then look for explanation later... and that could be very damaging to the overall investor psyche.

Over the last two trading days the stock price has dropped almost 20% and seems to be holding at $2.92 for now. Is there further decline possible; that’s the next question in our minds?

Let’s take a look, shall we...

Asia Optical Comments about TI Pico Solution:
Asia Optical is a relatively new supply chain partner of Microvision with a relationship that formed just over a year ago. When AO makes comments that favor TI pico solution; it is understandable since Asia Optical has years of existing and ongoing relationship with them. So we can put that aside and consider it a minor twister in the way large corporations stick together and pay more attention to their current revenue source rather than go out of their way to support the business plan of a newcomer [like Microvision] with a glowing future potential.

Granted, that AO could have said something complimentary to TI without stating the “DLP pico(TM) as the most compelling solution to provide our customers due to its superior image quality, small form factor and energy delivering efficiency”. When you look at the choice of words that AO used, it is easy to mistakenly take it as saying that DLP pico(TM) solution is the best for embedded applications. Asia Optical knows that pico(TM) is the registered trade mark of Microvision. And DLP pico solution may not be the best when compared to laser based PicoP solution from Microvision for embedded applications. However, there are no embedded pico display engines from Microvision to be found on planet earth as yet. So, considering the existing pico technologies out there currently; the DLP pico solution is perhaps the most compelling solution etc. etc.

Read again what it says in the January 6th Press Release...

"Following an extensive comparison of all pico technology options we selected DLP Pico(TM) as the most compelling solution to provide our customers due to its superior image quality, small form factor and energy delivering efficiency," said Robert Lai, founder, chairman and CEO of Asia Optical. "We believe the market opportunity for embedded displays in consumer electronics products, such as digital still cameras and digital video cameras, is significant and we are excited to launch the first product with DLP very soon."

Here’s the link...

Interview with Microvision CEO Alex Tokman:
On January 6th, Alex Tokman gave an interview that was posted at the company’s blog site The Displayground.

Here’s the link to the interview...

First, I must congratulate the management for taking the bold initiative to communicate with the stakeholders at the blog in such an informal setting. The Displayground has been a leap of faith in the way a corporation, such as Microvision, has embraced the Internet to communicate with its stakeholders.

Having said that, any effort to communicate with the stakeholders is to be commended!

However, Investors of Microvision have such high expectations of the management that at first blush the interview looks so stiff and staged. But when you look at the interview again and pay more attention to the subject matter, rather than watch the body language of Alex Tokman, it kind of grows on you. We, as investors, must realize that video interviews with corporate CEOs that are conducted in an in-house informal setting to communicate are not a very common practice. They may look staged initially but they certainly will get better as they become more frequent and with some practice.

Now let’s get to the center of this “perfect storm”...

It’s not very often, if ever, that you see the CEO of a company give an informal interview to release information that could have some serious consequences to not only its stock price but also raise questions about the credibility of its CEO. Unfortunately, that’s exactly what this interview did... precipitate a stock sell-off and, in my opinion, seriously damaged the credibility to Microvision CEO.

Both the timing and the intended [or unintended] information disseminated at this interview left the investors with a perception of further delays in green laser production and also delays in the release of pico display engine evaluation units for embedded applications.

First the timing...

The timing of this in-house interview with Microvision CEO couldn’t have been the worst move in the history of Microvision. It tops all the other “blunders” the top Management [past and present] has made over the years. In my opinion, it takes the “Last Blooper Standing” award of the year and effectively neutralizes any positive impact of the CES 2010 award that Microvision received as the “Last Gadget Standing” for its SHOWwx projector.

Bloopers happen usually as accidental, and usually has humor when it happens. Where actors need to memorize large numbers of lines or perform a series of actions in quick succession, mistakes can be expected. Some common examples include:

• Uncontrollable laughter (called in television circles, corpsing);
• Unanticipated incidents (like constant figiding);
• Forgotten lines; or
• Deliberate sabotage of an actor's performance by a fellow actor (to evoke laughter).

Unfortunately, this CEO interview did not evoke any laughter... but caused damage by precipitating MVIS stock sell-off and raised questions about Alex Tokman’s already fragile credibility as a CEO. We can blame Corning, Osram and green lasers for all of Microvision’s current problems all day... but at the end of the day it all falls in the lap of the CEO.

PC Magazine Review:
On January 7th, PC Magazine published their findings of SHOWwx pico projector review. Boy, oh boy! Talk about perfect timing to join in the storm brewing at Microvision.

First, here’s the link...,2817,2357640,00.asp

Whatever their motivation, the PC Magazine didn't have a “Single” good thing to say about Microvision’s SHOWwx. It's like the reviewer went out of his way to look for and focus on the negatives. Absolutely “Nothing” impressed him about SHOWwx at all.

Everything we have seen and heard about SHOWwx tells us that it's an impressive, even jaw-dropping pico projector with stunning image quality and vivid colors. Everything PC Magazine tells us is: it's missing a couple of lumens, it washes out in minimal light, it has speckles, its cables are too stiff, it's got a green line across the bottom, and it's overpriced. Without saying so, this guy even hinted that it could burn your eyes out, but thank God humans are programmed to blink before that happens! I am really surprised PC Magazine reviewer didn't dump on SHOWwx battery life [longer than anyone else], heat generation [none at all] and bow-tie effect too.

When you compare the stack of favorable reviews from multiple reviewers and one bad review from PC Magazine, it makes you wonder and very suspicious towards the reviewer.

I don't think the PC Magazine reviewer is on the take nor has a grudge against Microvision. Two people can look at the same thing with different expectations and draw different conclusions. May be the reviewer got a bad unit or one that hadn't been calibrated properly.”

However, the question is: “Who else is going to review the SHOWwx, what are they going to say about it, and what will their motivation be?”

There was obvious intent here to neutralize the SHOWwx most powerful strength, its projected image size and image quality, and this PC Magazine review did just that. This was well thought out by a cunning mind not some nitwit journalist on the take. It was most likely written well in advance and this clown simply put his name on it.

In my opinion, and the opinion of many others that I respect, the PC Magazine review is not only flawed but it is also biased. And that will be the subject of my next post.

For one quick example of why PC Magazine reviews of SHOWwx is flawed...

Diffused light measurement techniques and devices are not [and should not be] used for measuring light output from pulsating [or modulating] laser light sources especially where the laser light is switched on/off during periods of dark picture areas. Diffused light sources put out lumens whether you need them for projected images or not... and that should explain the disparity in very simple words.

PC Magazine is wrong in stating 8 lumens measured vs. the stated 10 lumens... because when correctly measured the Microvision laser pixels are at 10+ lumens. You can call Corning for yourself and verify that.

As for SHOWwx projector image quality, a picture speaks a thousand words. Just look at the latest videos and think for yourself...

or this...

or this...

or this...

Then there is this glowing review by Melissa Arseniuk for Canwest News Service...

“Another product attracting a lot of attention at CES is a Microvision portable projector ($500, available March 2010). It allows users to share images from their cellphones, iPods, computers and cameras by projecting them onto the nearest flat surface.

The projector follows the hype generated by AT&T last month when the cellphone giant released the LG eXpo, its first cellphone with built-in video projection capabilities.

While the Microvision device is an external product, it blows the LG eXpo out of the water in terms of resolution and versatility.”

Here’s the link...

At the CES 2010, Microvision’s SHOWwx projector won the “Last Gadget Standing” award when competing with 24 other semi-finalists. SHOWwx had over 7,300 on-line views and received 99,148 votes.

Here’s the link...

Now you tell me?

Over 99,148 on-line votes and everything we have seen and heard over the last year tells us that SHOWwx is an impressive, even jaw-dropping, pico projector with stunning image quality and vivid colors. Everything PC Magazine tells us is: it's missing a couple of lumens, it washes out in minimal light, it has speckles, its cables are too stiff, it's got a green line across the bottom, and it's overpriced. Without saying so, this guy even hinted that it could burn your eyes out, but thank God humans are programmed to blink before that happens!

You get what you see... and not what PC Magazines says there is or isn’t.

PC Magazine review is flawed and biased.

Read all about it in my next post.

In closing this post...

The stakes here are very high, and we are worried that Microvision management underestimates the things they need to do, as well as, the things their competitors will do to gain advantage in the pico projector marketplace. Obviously, Microvision management did not see this “perfect storm” coming and apparently has no contingency plan.

Microvision does have the financial backing to survive the “perfect storm” over the next 3 to 4 Qtrs. However, it will take some more financing money and Management charisma to pull out of this Perfect Storm on its own... considering the investor dissent brewing on the horizon.

I can't wait to see what's in store for tomorrow? Perhaps some more down-side and margin calls for the long investors.

Anant Goel