At the Microvision shareholder’s meeting on September 15th, 2009, there were some questions asked about OEM relationship with Apple.
My take on CEO Alex Tokman’s answer was something like: “Apple World loves us and we have to be ready… I just ask you that you be patient.” In all probability, Microvision was in talks with “Apple”, however, there wasn't enough unit volume of PicoP Display Engines for Apple’s appetite at that time to be engaged officially.
Fast forward to today, last day of August 2010…
A year later, you may want to re-visit the questions about Apple in light of Microvision’s $11.1 million order from a [non-disclosed] Media Player OEM for the embedded PDEs…
• $11.1 million in initial order is not a small order by any means… because after the initial order, all of Microvision production could go to this OEM on a monthly basis. And these monthly orders represent about $12 million per Qtr [20,000pm x 3m x $200per unit = $12 million] in the first half of 2011… and increasing.
• With 5 Green Laser suppliers, the unit production can easily be ramped –up to 100,000 units per month… and that’s a decent production run for any Premium Media Player OEM like Apple or NetFlix.
• With diode GL coming into play some time in 2011, number of units can only go higher than the 100,000 per month… and that’s not shabby at all.
• Since announcing the Media Player OEM early this year, Microvision has been very tight lipped about the identity of this OEM… which is a typical modus of operands for any of the Apple suppliers. A small time OEM would probably follow the example of rest of the OEM flock in the CE industry─ where it is a common practice to earn some free publicity by announcing new products in the pipe line.
• CEO of Microvision has, on more than one occasion, stated publicly that the Media Player OEM would announce the product on its own time schedule before the 2010 Christmas shopping season. Well, early September is a good time to announce new products for the 2010 seasonal shopping… don’t you think? Apple will be making product announcements on September 1st … now that’s some coincidence!!!
• On March 8th, 2010, Microvision announced two new members of the management team: Joe O'Sullivan as Vice President of Global Operations and Michael Fritts as Vice President of Global Sales, Marketing, and Business Development.
Mr. O'Sullivan is a consumer electronics industry veteran with executive management experience at Apple Computer and InFocus. At Apple, Mr. O'Sullivan spent 15 years in operations and supply chain management, including Vice President of Operations where he was instrumental in building a global operations infrastructure in Asia. In addition, he developed Apple's International Procurement Organization strategy, building a structure in Japan, Taiwan, Hong Kong, China, Singapore and Europe.
Today, a day before Apple’s new product introduction on September 1st , we hear this rumor about: “New iPod May Include Projector”. Could it be Microvision’s laser based PicoP projector inside the Apple’s new premium iPod?
We just have to wait and see.
Here’s the link to the rumor news…
http://www.benzinga.com/company-news/contracts/10/08/450653/new-ipod-may-include-projector-mvis-aapl
While we wait, let’s look at Apple’s secret to success…
“Show and Sell”
All the while the competition…
"Flashes an exotic prototype, then – Presto! – get consumers to buy their more boring stuff. That kind of thinking still rules at most electronics companies. Apple under Steve Jobs only shows off actual products. And that difference is Apple’s arcane secret to success."
Like washed-up Catskill magicians unable to let go of old routines while a brash upstart steals their audience, nearly every maker of consumer electronics in the world clings to a quaint song-and-dance about prototypes.
“Here is your possible future,” they bark, flourishing the latest conceptual product from the lab. “Now watch us make it disappear!”
Apple’s chief magician, however, knows better, pulling solid objects out of the ether; products you can actually buy.
No one can be sure until the rumors lead the way to actual news in the media or corporate announcements.
But if you think it is possible, than rest assure it can happen someday.
If this sounds like a minor complaint about most of the industry’s lack of imagination in marketing, you’re misunderstanding the whole act. The fact that Apple does not reveal prototypes but shipping products; is the fundamental difference between their entire business strategy and that of the rest of the CE industry. It evokes a feeling of trust between Apple and consumers – that when Apple actually reveals a product, it’s something that they’re confident enough to support for years to come.
Anant Goel
Tuesday, August 31, 2010
Friday, August 27, 2010
Microvision: Investors Are Just Frustrated
Definition of “Frustration”…
• The act of frustrating or an instance of being frustrated
• The state of being frustrated
• Something that serves to frustrate
Let's add one more definition to the word frustration...
“waiting for definitive plans and answers to simple question from Microvision while being told that the management will disclose them soon by the next CC… or some other future event that has come and gone by the way side over the last 4 years.”
How dare we worry about where our investment dollars are going when it's such a small part of the big picture of: “the holly grail of embedded PicoP projectors in the billion unit mobile world?” What frustrates us now is another article about the Green Laser price and availability. It sounded like yet another warning, by those in the industry, why a laser based PicoP will fail because of Green Laser pricing issues. I’m sure Microvision brass has the answers, and has its reasons for keeping quite on the issue, but can somebody please throw some light on this 4 year old issue of GL availability, pricing and stability issues as they affect the profit margins and eventual success of laser based PicoP projectors.
Here’re some more thoughts on frustration…
I'm getting emails and phone calls and I know that many folks just want to throw in the towel out of frustration and a lack of confidence. Day to day it's hard to see where it will end, but I think we are going to be just fine and at the end of the day [in mid 2011] Microvision investor will come out whole.
If you are wondering “why mid 2011”…
Here’s what I have finally figured out…
• Currently, the quantities of synthetic green lasers and the ASICs are too small─ like 5,000 to 10,000 units per month, and the cost is relatively too expensive… thus the negative profit margins. The key word is “relatively”… meaning product cost [in such small quantities] is more than the transfer price that can be charged to the OEMs at a suggested retail price of $549.
• To put it another way; if the retail price was increased to $649 and the transfer price charged to OEMs also raised by say $60… than the relative cost of product─ at such small quantities, may NOT be, relatively speaking, too expensive… thus the potential for positive profit margins.
However, the recent drop of $100 in the retail price of SHOWwx [from $549 to $449] mucks the waters yet again and that is frustrating. Does this mean that the price of synthetic green lasers has come down significantly to a point where Microvision can charge less for SHOWwx and still make some profit? Well, that is one thought… as in one side of the coin so to speak.
The other side of the coin could be; that Microvision needs to clear old stock at a loss in anticipation of second generation PDEs that are expected to be cheaper, smaller, more energy efficient and with higher 15- lumen brightness and 720P HD resolution.
We don’t know for sure one way or the other… and that is frustrating.
The current debate between synthetic green lasers versus the diode [direct] green lasers got so confusing at the 2nd Qtr earnings CC that Microvision CEO responded with a Blog post at The Displayground to clear-up the matter.
Here’s the link…
http://www.microvision.com/displayground/?p=1761#comments
Green Laser Diodes Are On the Way, In the Meantime If Done Right Synthetic Green Lasers Have an Embedded Play
What I find very interesting is the comment about…
“We have already begun to see availability of the first generation synthetic lasers increase. The next generation synthetic green lasers are expected to be more efficient and less expensive than their first generation cousins. We also anticipate that the direct green lasers targeted for introduction in the second half of next year may not reach desired performance and cost targets immediately. For these reasons, we believe that synthetic lasers could continue to remain a competitive alternative to direct green lasers for at least the first 4-5 years after diodes are introduced.”
From the CEO comments about synthetic lasers, it is now clear that they have 4-5 years as the economic life cycle… before the diode green laser mature and become cost competitive. Considering the potential volume sales of laser based pico projectors over the next 5 years, which could easily run into 200-300 million units, there’s enough incentive for the synthetic green laser manufactures to ramp-up production with corresponding drop in prices.
I see two opportunities for cost reduction, and a very strong possibility of profitable margins, in the near future…
• Next generation green lasers and ASICs should be coming out in the next three or four months and they are more efficient and less expensive… and that bodes well for positive margins.
• A significantly large order from an OEM, in the 50,000 to 100,000 units per month range, will not only motivate the synthetic Green Laser suppliers, Corning and Osram, to crank-up the production lines… but it will also help reach the critical volume in terms of quantities that would result in some dramatic price drop.
With next generation synthetic Green Laser supply continuing to improve over the rest of year 2010, it is just the matter of time that a visionary company like Apple will come waltzing down the aisle to embed Microvision’s PDEs in their smartphones, iPads or iPods etc. If it is not Apple or NetFlix initially, it will be someone else… you can bet on that.
It may not be quite apparent to the naked eye; but with a little diligence the negative profit margins issue is just a short term anomaly that should correct itself in the next three to four months.
In the meantime, we are just frustrated!
Anant Goel
• The act of frustrating or an instance of being frustrated
• The state of being frustrated
• Something that serves to frustrate
Let's add one more definition to the word frustration...
“waiting for definitive plans and answers to simple question from Microvision while being told that the management will disclose them soon by the next CC… or some other future event that has come and gone by the way side over the last 4 years.”
How dare we worry about where our investment dollars are going when it's such a small part of the big picture of: “the holly grail of embedded PicoP projectors in the billion unit mobile world?” What frustrates us now is another article about the Green Laser price and availability. It sounded like yet another warning, by those in the industry, why a laser based PicoP will fail because of Green Laser pricing issues. I’m sure Microvision brass has the answers, and has its reasons for keeping quite on the issue, but can somebody please throw some light on this 4 year old issue of GL availability, pricing and stability issues as they affect the profit margins and eventual success of laser based PicoP projectors.
Here’re some more thoughts on frustration…
- Having the wool pulled over our eyes is frustrating;
- Lack of communications in spoken English is frustrating;
- Waiting for straight answers is frustrating;
- Having legitimate concerns brushed aside is frustrating;
- Being told to take the pain and ignore the small stuff is frustrating;
- Watching the market price of MVIS drift lower and lower is frustrating, too.
I'm getting emails and phone calls and I know that many folks just want to throw in the towel out of frustration and a lack of confidence. Day to day it's hard to see where it will end, but I think we are going to be just fine and at the end of the day [in mid 2011] Microvision investor will come out whole.
If you are wondering “why mid 2011”…
Here’s what I have finally figured out…
• Currently, the quantities of synthetic green lasers and the ASICs are too small─ like 5,000 to 10,000 units per month, and the cost is relatively too expensive… thus the negative profit margins. The key word is “relatively”… meaning product cost [in such small quantities] is more than the transfer price that can be charged to the OEMs at a suggested retail price of $549.
• To put it another way; if the retail price was increased to $649 and the transfer price charged to OEMs also raised by say $60… than the relative cost of product─ at such small quantities, may NOT be, relatively speaking, too expensive… thus the potential for positive profit margins.
However, the recent drop of $100 in the retail price of SHOWwx [from $549 to $449] mucks the waters yet again and that is frustrating. Does this mean that the price of synthetic green lasers has come down significantly to a point where Microvision can charge less for SHOWwx and still make some profit? Well, that is one thought… as in one side of the coin so to speak.
The other side of the coin could be; that Microvision needs to clear old stock at a loss in anticipation of second generation PDEs that are expected to be cheaper, smaller, more energy efficient and with higher 15- lumen brightness and 720P HD resolution.
We don’t know for sure one way or the other… and that is frustrating.
The current debate between synthetic green lasers versus the diode [direct] green lasers got so confusing at the 2nd Qtr earnings CC that Microvision CEO responded with a Blog post at The Displayground to clear-up the matter.
Here’s the link…
http://www.microvision.com/displayground/?p=1761#comments
Green Laser Diodes Are On the Way, In the Meantime If Done Right Synthetic Green Lasers Have an Embedded Play
What I find very interesting is the comment about…
“We have already begun to see availability of the first generation synthetic lasers increase. The next generation synthetic green lasers are expected to be more efficient and less expensive than their first generation cousins. We also anticipate that the direct green lasers targeted for introduction in the second half of next year may not reach desired performance and cost targets immediately. For these reasons, we believe that synthetic lasers could continue to remain a competitive alternative to direct green lasers for at least the first 4-5 years after diodes are introduced.”
From the CEO comments about synthetic lasers, it is now clear that they have 4-5 years as the economic life cycle… before the diode green laser mature and become cost competitive. Considering the potential volume sales of laser based pico projectors over the next 5 years, which could easily run into 200-300 million units, there’s enough incentive for the synthetic green laser manufactures to ramp-up production with corresponding drop in prices.
I see two opportunities for cost reduction, and a very strong possibility of profitable margins, in the near future…
• Next generation green lasers and ASICs should be coming out in the next three or four months and they are more efficient and less expensive… and that bodes well for positive margins.
• A significantly large order from an OEM, in the 50,000 to 100,000 units per month range, will not only motivate the synthetic Green Laser suppliers, Corning and Osram, to crank-up the production lines… but it will also help reach the critical volume in terms of quantities that would result in some dramatic price drop.
With next generation synthetic Green Laser supply continuing to improve over the rest of year 2010, it is just the matter of time that a visionary company like Apple will come waltzing down the aisle to embed Microvision’s PDEs in their smartphones, iPads or iPods etc. If it is not Apple or NetFlix initially, it will be someone else… you can bet on that.
It may not be quite apparent to the naked eye; but with a little diligence the negative profit margins issue is just a short term anomaly that should correct itself in the next three to four months.
In the meantime, we are just frustrated!
Anant Goel
Microvision: Announces Second Quarter 2010 Results
Press Release
August 05, 2010
04:00 PM Eastern Daylight Time
Quarterly Revenue Grows to $2.1 Million and Backlog to $20.1 Million
REDMOND, Wash.--(BUSINESS WIRE)--Microvision, Inc. (NASDAQ: MVIS), a leader in innovative ultra-miniature projection display technology, today reported its operating and financial results for the second quarter of 2010.
Operating Results
“I’m pleased to report that our ongoing investment to improve our production and supply chain capabilities resulted in a more stable and predictable flow of finished product in the second quarter,” stated Alexander Tokman, President and CEO. “We continue to see an increase in our green laser supply and smooth conversion of raw materials into finished goods. This strengthening of capacity will become increasingly important in the second half of 2010 as we plan to deliver larger volumes of PicoP®-based products to our customers to meet their strong demand.
“Our backlog grew to a record $20.1 million and includes a $3.4 million follow-on order from our initial OEM display engine customer. The demand for our PicoP-based products remains strong from both existing and new customers who are excited about the unique capabilities of our PicoP projection solution. In connection with our capacity increase during the second quarter, we have increased our global distribution points and continue to qualify additional distribution partners. Customer response to the SHOWWX™ laser pico projector has been very positive.
“Our future success will depend on our ability to anticipate consumer needs and rapidly innovate to bring new products to market leveraging the unique capabilities of our PicoP technology. With this in mind, we recently unveiled a 15-lumen, 720p HD-ready pico projector prototype. We have received a very enthusiastic response to the high resolution, brighter images from this prototype and believe that advancing our PicoP technology platform will continue to position us as a premier provider of customer-focused projection solutions,” concluded Mr. Tokman.
Financial Results
The following financial results are for the three and six months ended June 30, 2010, respectively, compared to the same period one year earlier.
Revenue was $2.1 million compared to $987,000 for the second quarter and $2.8 million, compared to $1.9 million for the first half. The company’s quarterly revenue grew from the first quarter of 2010 and year-over-year as higher volumes of PicoP-based products were shipped to customers.
Backlog was $20.1 million at June 30, 2010 compared to $854,000 at June 30, 2009. The backlog is composed almost exclusively of orders for the company’s PicoP embedded engine and its SHOWWX laser pico projector.
Operating loss was $11.1 million compared to $9.5 million for the quarter, and $20.6 million compared to $18.6 million for the first half. The increased operating loss was due to higher operating costs attributable to commercialization of the SHOWWX product.
Net loss for the quarter was $11.1 million, or $0.12 per share compared to $10.4 million, or $0.15 per share. Net loss for the six months was $20.2 million, or $0.23 per share compared to $19.3 million, or $0.28 per share.
Net cash used in operating activities for the six months was $22.3 million, compared to $16.3 million. The increase was attributable to a higher net loss and an increase in working capital requirements. The increase in working capital requirements reflected a combination of increased inventory of raw materials and subassemblies with long lead times as the company prepares to ship higher product volumes in the second half of the year to meet customer delivery requirements, and a higher accounts receivable balance due to the timing of product shipments during the quarter.
The company ended the quarter with $22.2 million in cash, cash equivalents and investment securities.
Management will discuss the company’s operating and financial results and current business operations in more detail during its conference call at 4:30 p.m. ET / 1:30 p.m. PT today.
Continues…
http://finance.yahoo.com/news/Microvision-Announces-Second-bw-2632688220.html?x=0&.v=1
Here’re some observations from the earnings report and the subsequent CC later in the evening…
Operating Results Observation:
• Improved production and supply chain capabilities resulted in a more stable and predictable flow of finished product in the second quarter. Return rates on the SHOWwx are now averaging 2.5%... well below the industry norms.
• Continue to see an increase in the synthetic Green Laser supply and smooth conversion of raw materials into finished goods.
• Strengthening of capacity in the second half of 2010 to meet strong customer demand.
• Backlog grew to a record $20.1 million and includes a $3.4 million follow-on order from the initial OEM for embedded PDEs customer.
• The demand for PicoP-based products remains strong from both existing and new customers.
• Capacity increase during the second quarter allowed Microvision to increase their global distribution points and they continue to qualify additional distribution partners.
• Customer response to the SHOWwx™ laser pico projector has been very positive.
• Microvision has received a very enthusiastic response to the high resolution, brighter images from the new 15-lumen, 720p HD-ready PicoP prototype.
The high end media product is expected to be released for the 2010 Christmas holiday shopping season and the follow-up order form this customer sort of confirms what CEO Tokman had said at the 1st Qtr CC.
• It appears Microvision sold about 5,000 SHOWwx… to arrive at the $2 million in product sales revenue.
• Green Laser Diodes are on the way. In the meantime, if done right, the synthetic Green Lasers have an embedded play… for the next 4-5 years. Here’s what CEO Tokman said in The Displayground Blog post…
“We have already begun to see availability of the first generation synthetic lasers increase. The next generation synthetic green lasers are expected to be more efficient and less expensive than their first generation cousins. We also anticipate that the direct green lasers targeted for introduction in the second half of next year may not reach desired performance and cost targets immediately. For these reasons, we believe that synthetic lasers could continue to remain a competitive alternative to direct green lasers for at least the first 4-5 years after diodes are introduced.”
• If a respectable customer places a large order, Microvision would certainly discuss with the synthetic Green Laser suppliers the possibility of increasing production.
Here’s my take on this subject…
Corning and Osram have a limited manufacturing capacity that’s capable of handling the currently forecasted product introduction volumes. However, with sufficient investment, they could expand the manufacturing capacity. This would represent up front capital cost and Microvision can't do it by itself.
Let me put it bluntly…
Assuming "Sony or Apple" places an order for 1,000,000 units spread over a year and deliverable starting say mid 2011… then Corning and Osram could invest into expanding their synthetic GL manufacturing capacity and provide the necessary product. The reason Tokman indicated a "respectable customer" is because they would be the ones to deal with the GL suppliers and guarantee the payment for this capacity increase. Having "Sony or Apple" as a customer pretty much guarantees that the order will not be cancelled just for the fun of it. I'm sure they already know the price point where it is worth upgrading manufacturing capacity… either for a large order from a "respectable customer" or a lot of small orders where the expected rate of default would still ensure a profit for the GL manufacturers.
• Microvision expects 5-7 green laser suppliers in 2011.
Financial Results Observation:
• Revenues for the 2nd Qtr were $2.1 million compared to $987,000 for the second quarter of 2009… and the growth on the year-over-year basis was from higher volumes of PicoP-based products that were actually shipped to customers.
For a company that launched laser based SHOWwx in September 2009, and announced the availability of the hottest consumer electronic product of this decade in March 2010, the Microvision management team was awfully quiet on all fronts of news with no visible signs of product promotions, marketing or sales.
With that in mind, and taking all the plausible scenarios into consideration, I was looking at $1,900,000 to $3,600,000 in recognized product revenues for the 2nd Qtr 2010.
As I said before; anything less than $1,900,000 in recognized product revenues would be the sign of poor sales… that are not necessarily held back by green laser availability. Current events and management changes taking place at Microvision pointed more to this revenue number than anything higher. With product revenues for the 2nd Qtr coming-in at $2 million and the backlog increased to $20.1 million… I’m not sure what to make of it and that is frustrating.
• Backlog was $20.1 million at June 30, 2010.
• The backlog is composed almost exclusively of orders for the PicoP embedded engine and its SHOWwx laser pico projector.
• Operating loss was $11.1 million for the 2nd Qtr.
• The increased operating loss was due to higher operating costs attributable to commercialization of the SHOWwx product.
• Net loss for the quarter was $11.1 million, or $0.12 per share compared to $10.4 million, or $0.15 per share.
• The increase in net loss was attributable to a higher net loss and an increase in working capital requirements. The increase in working capital is reflected by a combination of increased inventory of raw materials and subassemblies with long lead times─ as the company prepares to ship higher product volumes in the second half of the year, and a higher accounts receivable balance─ due to the timing of product shipments during the 2nd quarter.
• From the 2nd Qtr Income Statement; the Product Revenue was $2,015,000 with Cost of Product Revenue being $3,337,000. The costs to produce accessory pico projector units during the three months ended June 30, 2010 were substantially higher than product revenue. Cost of product revenue includes the direct and allocated indirect cost of manufacturing products sold to customers. Direct costs include labor, materials and other costs incurred directly in the manufacture of these products. Indirect costs include labor and other costs associated with operating the manufacturing capabilities and capacity.
• During the three months ended June 30, 2010, cost of product revenue included a lower of cost or market adjustment of $701,000 for inventory in stock at the end of the quarter.
• The overhead cost included in the cost of product revenue consists of the costs of procuring, inspecting and storing material, and facility and depreciation costs; and is allocated to inventory, cost of product revenue, cost of contract revenue, and research and development expense based on the level of effort supporting production or research and development activities.
• The cost of product revenue as a percentage of product revenue can fluctuate significantly from period to period, depending on the product mix and volume and the level of overhead expense.
• The company ended the 2nd Qtr with $22.2 million in cash, cash equivalents and investment securities.
My main issue with this Financial Report is NOT so much about hitting the low end of Product Revenues… but it is the negative profit margins that are frustrating.
Microvision used lots of fancy words to simply explain the inventory markdowns leading to negative profit margins… meaning that every time Microvision sells a product, it takes a small loss. Since there is no corporate guidance, and investor questions on this issue were brushed aside, this “negative margins” issue has been exploited by the opportunistic and unscrupulous short traders in relentlessly driving down the price of Microvision stock over the last few weeks… and that is very frustrating.
Continues with the next post…
Microvision: Investors Are Just Frustrated
Anant Goel
August 05, 2010
04:00 PM Eastern Daylight Time
Quarterly Revenue Grows to $2.1 Million and Backlog to $20.1 Million
REDMOND, Wash.--(BUSINESS WIRE)--Microvision, Inc. (NASDAQ: MVIS), a leader in innovative ultra-miniature projection display technology, today reported its operating and financial results for the second quarter of 2010.
Operating Results
“I’m pleased to report that our ongoing investment to improve our production and supply chain capabilities resulted in a more stable and predictable flow of finished product in the second quarter,” stated Alexander Tokman, President and CEO. “We continue to see an increase in our green laser supply and smooth conversion of raw materials into finished goods. This strengthening of capacity will become increasingly important in the second half of 2010 as we plan to deliver larger volumes of PicoP®-based products to our customers to meet their strong demand.
“Our backlog grew to a record $20.1 million and includes a $3.4 million follow-on order from our initial OEM display engine customer. The demand for our PicoP-based products remains strong from both existing and new customers who are excited about the unique capabilities of our PicoP projection solution. In connection with our capacity increase during the second quarter, we have increased our global distribution points and continue to qualify additional distribution partners. Customer response to the SHOWWX™ laser pico projector has been very positive.
“Our future success will depend on our ability to anticipate consumer needs and rapidly innovate to bring new products to market leveraging the unique capabilities of our PicoP technology. With this in mind, we recently unveiled a 15-lumen, 720p HD-ready pico projector prototype. We have received a very enthusiastic response to the high resolution, brighter images from this prototype and believe that advancing our PicoP technology platform will continue to position us as a premier provider of customer-focused projection solutions,” concluded Mr. Tokman.
Financial Results
The following financial results are for the three and six months ended June 30, 2010, respectively, compared to the same period one year earlier.
Revenue was $2.1 million compared to $987,000 for the second quarter and $2.8 million, compared to $1.9 million for the first half. The company’s quarterly revenue grew from the first quarter of 2010 and year-over-year as higher volumes of PicoP-based products were shipped to customers.
Backlog was $20.1 million at June 30, 2010 compared to $854,000 at June 30, 2009. The backlog is composed almost exclusively of orders for the company’s PicoP embedded engine and its SHOWWX laser pico projector.
Operating loss was $11.1 million compared to $9.5 million for the quarter, and $20.6 million compared to $18.6 million for the first half. The increased operating loss was due to higher operating costs attributable to commercialization of the SHOWWX product.
Net loss for the quarter was $11.1 million, or $0.12 per share compared to $10.4 million, or $0.15 per share. Net loss for the six months was $20.2 million, or $0.23 per share compared to $19.3 million, or $0.28 per share.
Net cash used in operating activities for the six months was $22.3 million, compared to $16.3 million. The increase was attributable to a higher net loss and an increase in working capital requirements. The increase in working capital requirements reflected a combination of increased inventory of raw materials and subassemblies with long lead times as the company prepares to ship higher product volumes in the second half of the year to meet customer delivery requirements, and a higher accounts receivable balance due to the timing of product shipments during the quarter.
The company ended the quarter with $22.2 million in cash, cash equivalents and investment securities.
Management will discuss the company’s operating and financial results and current business operations in more detail during its conference call at 4:30 p.m. ET / 1:30 p.m. PT today.
Continues…
*****
Here’s the link to the full Press Release…http://finance.yahoo.com/news/Microvision-Announces-Second-bw-2632688220.html?x=0&.v=1
Here’re some observations from the earnings report and the subsequent CC later in the evening…
Operating Results Observation:
• Improved production and supply chain capabilities resulted in a more stable and predictable flow of finished product in the second quarter. Return rates on the SHOWwx are now averaging 2.5%... well below the industry norms.
• Continue to see an increase in the synthetic Green Laser supply and smooth conversion of raw materials into finished goods.
• Strengthening of capacity in the second half of 2010 to meet strong customer demand.
• Backlog grew to a record $20.1 million and includes a $3.4 million follow-on order from the initial OEM for embedded PDEs customer.
• The demand for PicoP-based products remains strong from both existing and new customers.
• Capacity increase during the second quarter allowed Microvision to increase their global distribution points and they continue to qualify additional distribution partners.
• Customer response to the SHOWwx™ laser pico projector has been very positive.
• Microvision has received a very enthusiastic response to the high resolution, brighter images from the new 15-lumen, 720p HD-ready PicoP prototype.
The high end media product is expected to be released for the 2010 Christmas holiday shopping season and the follow-up order form this customer sort of confirms what CEO Tokman had said at the 1st Qtr CC.
• It appears Microvision sold about 5,000 SHOWwx… to arrive at the $2 million in product sales revenue.
• Green Laser Diodes are on the way. In the meantime, if done right, the synthetic Green Lasers have an embedded play… for the next 4-5 years. Here’s what CEO Tokman said in The Displayground Blog post…
“We have already begun to see availability of the first generation synthetic lasers increase. The next generation synthetic green lasers are expected to be more efficient and less expensive than their first generation cousins. We also anticipate that the direct green lasers targeted for introduction in the second half of next year may not reach desired performance and cost targets immediately. For these reasons, we believe that synthetic lasers could continue to remain a competitive alternative to direct green lasers for at least the first 4-5 years after diodes are introduced.”
• If a respectable customer places a large order, Microvision would certainly discuss with the synthetic Green Laser suppliers the possibility of increasing production.
Here’s my take on this subject…
Corning and Osram have a limited manufacturing capacity that’s capable of handling the currently forecasted product introduction volumes. However, with sufficient investment, they could expand the manufacturing capacity. This would represent up front capital cost and Microvision can't do it by itself.
Let me put it bluntly…
Assuming "Sony or Apple" places an order for 1,000,000 units spread over a year and deliverable starting say mid 2011… then Corning and Osram could invest into expanding their synthetic GL manufacturing capacity and provide the necessary product. The reason Tokman indicated a "respectable customer" is because they would be the ones to deal with the GL suppliers and guarantee the payment for this capacity increase. Having "Sony or Apple" as a customer pretty much guarantees that the order will not be cancelled just for the fun of it. I'm sure they already know the price point where it is worth upgrading manufacturing capacity… either for a large order from a "respectable customer" or a lot of small orders where the expected rate of default would still ensure a profit for the GL manufacturers.
• Microvision expects 5-7 green laser suppliers in 2011.
Financial Results Observation:
• Revenues for the 2nd Qtr were $2.1 million compared to $987,000 for the second quarter of 2009… and the growth on the year-over-year basis was from higher volumes of PicoP-based products that were actually shipped to customers.
For a company that launched laser based SHOWwx in September 2009, and announced the availability of the hottest consumer electronic product of this decade in March 2010, the Microvision management team was awfully quiet on all fronts of news with no visible signs of product promotions, marketing or sales.
With that in mind, and taking all the plausible scenarios into consideration, I was looking at $1,900,000 to $3,600,000 in recognized product revenues for the 2nd Qtr 2010.
As I said before; anything less than $1,900,000 in recognized product revenues would be the sign of poor sales… that are not necessarily held back by green laser availability. Current events and management changes taking place at Microvision pointed more to this revenue number than anything higher. With product revenues for the 2nd Qtr coming-in at $2 million and the backlog increased to $20.1 million… I’m not sure what to make of it and that is frustrating.
• Backlog was $20.1 million at June 30, 2010.
• The backlog is composed almost exclusively of orders for the PicoP embedded engine and its SHOWwx laser pico projector.
• Operating loss was $11.1 million for the 2nd Qtr.
• The increased operating loss was due to higher operating costs attributable to commercialization of the SHOWwx product.
• Net loss for the quarter was $11.1 million, or $0.12 per share compared to $10.4 million, or $0.15 per share.
• The increase in net loss was attributable to a higher net loss and an increase in working capital requirements. The increase in working capital is reflected by a combination of increased inventory of raw materials and subassemblies with long lead times─ as the company prepares to ship higher product volumes in the second half of the year, and a higher accounts receivable balance─ due to the timing of product shipments during the 2nd quarter.
• From the 2nd Qtr Income Statement; the Product Revenue was $2,015,000 with Cost of Product Revenue being $3,337,000. The costs to produce accessory pico projector units during the three months ended June 30, 2010 were substantially higher than product revenue. Cost of product revenue includes the direct and allocated indirect cost of manufacturing products sold to customers. Direct costs include labor, materials and other costs incurred directly in the manufacture of these products. Indirect costs include labor and other costs associated with operating the manufacturing capabilities and capacity.
• During the three months ended June 30, 2010, cost of product revenue included a lower of cost or market adjustment of $701,000 for inventory in stock at the end of the quarter.
• The overhead cost included in the cost of product revenue consists of the costs of procuring, inspecting and storing material, and facility and depreciation costs; and is allocated to inventory, cost of product revenue, cost of contract revenue, and research and development expense based on the level of effort supporting production or research and development activities.
• The cost of product revenue as a percentage of product revenue can fluctuate significantly from period to period, depending on the product mix and volume and the level of overhead expense.
• The company ended the 2nd Qtr with $22.2 million in cash, cash equivalents and investment securities.
My main issue with this Financial Report is NOT so much about hitting the low end of Product Revenues… but it is the negative profit margins that are frustrating.
Microvision used lots of fancy words to simply explain the inventory markdowns leading to negative profit margins… meaning that every time Microvision sells a product, it takes a small loss. Since there is no corporate guidance, and investor questions on this issue were brushed aside, this “negative margins” issue has been exploited by the opportunistic and unscrupulous short traders in relentlessly driving down the price of Microvision stock over the last few weeks… and that is very frustrating.
Continues with the next post…
Microvision: Investors Are Just Frustrated
Anant Goel
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