Wednesday, October 27, 2010

Microvision: Chickens Come Home to Roost

For a company that launched laser based SHOWwx in September 2009, and announced the availability of the hottest consumer electronic product of this decade, your management team is awfully quiet on all fronts of news with no visible signs of product promotions, marketing or sales. Granted, the backorders and future product introductions do count; but then again who knows for sure what the future would bring, and if the deliveries would be made at profitable terms.

Market does not like the lack of any significant news for extended periods and reacts by selling [and short selling] the Microvision stock. Just over the last few months, the stock price has dropped like a rock [down from $5.44 on October 26th 2009 to $1.96 this morning]. This kind of price drop, it seems, has become a norm for Microvision stock after every Qtr earnings CC or the Annual Shareholders Meeting.

Lack of news; or lack of any visible signs of product promotion, marketing, or sales does not build confidence in Microvision business model… and as a result, more and more investors [and supporters] abandon the MVIS stock every time there is carnage in its market price.

I don’t know if you realize how important the Microvision investors are to the well being, survival, and future prosperity of your [our] company?

Four years is a long time, and $160 million dollars is a lot of money, to accomplish what little progress Microvision has made under the current management.

Over the last four years, I have gone from being ultra bullish initially to being relatively bearish now. And that’s because too little has been accomplished over the last four years at an exorbitant cost of over $160 million dollars. Competition has caught-up with Microvision in all those product categories where the company may want to compete someday. And that someday still remains elusive and lies somewhere in the distant future.

Issues were well known four years ago; and they still are the same─ green laser technology, green laser quantities, green laser pricing, speckle, bow tie image effect, lack of image brightness, too warm to touch, too high a cash burn rate, constant need for additional funding, yada, yada, yada.

Over the last four years, Microvision spends almost $5 million per Qtr in SG&A; with an army of personnel in administration, management, sales, sales engineering, marketing, product development, business development, global business development, strategic planning & development, communications, Investor Relations, out-sourced Public Relations, etc. Any fancy management title that you can think of, you will find at least one, if not more, at Microvision. However, this army has basically produced very little in terms of product awareness, viral marketing, or sales… with years of insignificant revenues and zilch in profits.

If I were to vacillate between bullish to bearish [the so called flip flop] over a short period of time, your comments would have some merits. However, four years is a long time to learn the strengths and weaknesses of the management team that has been in place all these years.

Current management lacks vision and gumption… and that is worrisome because both cash and time is running out for Microvision. More of the same old… same old… will be detrimental to the well being of Microvision and its investors.

[Gumption: Courage, guts, nerve, bravery, common sense, good sense, horse sense, practicality, initiative, resourcefulness, get-up-and-go]

The current PIPE funding through Azimuth Opportunity Fund is indicative of the desperate financial situation that has finally arrived at the door steps of current Microvision management.

Sooner or later, we as the investors of Microvision will learn from our mistakes just like the current management of Microvision would realize soon enough that investor money is not an ever flowing river of milk and honey and the chickens do come home to roost.

Like many others, I too was surprised that Microvision, which has some great products and patents, needs to resort to financing through Azimuth Opportunity Fund. The fund is known as the equivalent of a pawn-shop in the investment community, as their strategy is not to invest for any period of time in the financed companies, but to dump the shares immediately in the market to get their invested capital out… and make as much profit they can get.

For me, and hundreds of others that have followed my recommendations, the mere fact that Microvision had to use such a fire-sale financing method is very negative… and is the final straw that broke the [proverbial] camel’s back.

Either the current management is very inexperienced and unaware how this will reflect on their company; or Microvision is really perceived as a bad risk by creditors.

Either way, the high cash burn rate and creditors' reluctance to lend more money to Microvision is not a good sign.

Someone recently made a comment at the Yahoo Message Board for Microvision…

"Microvision seems utterly unable to deliver on the promise of the technology and they have burned through all the money they are going to be able to raise trying to do so.”

“…. I'm sure the tech will become widely accepted but Microvision will have ceased to exist long before that happens. That's the real danger here. The company has been and is being run into the ground by …"

After 14 years and $385 million dollars later... such comments don't seem too far fetched. When you consider the last 4 years and over $160 million dollars in expenditure, while idling at the stop sign waiting for the green light, you would think that the management really believes in fairy tales and expects even more investor money to fund their orgy.

However, the good news is, if you could call it that, the chickens are coming home to roost─ we are down to the wire and are in the last two innings of this ball game.

Given another 9 months and the last $48 million dollars in pawn-shop slush fund, in my opinion, this fat and bloated management style will come to an end… or at the very least, there will be some re-balancing of the risk/reward matrices at the corporate management level.

Only time will tell the rest of the tale… in the meantime, smart money Wall Street has spoken by showing Microvision the door to the pawn-shops of the financial world.

Once Microvision burns another $48 million over the next three Qtrs, and at the end of this period is unable to self-sustain further cash requirements, nothing would matter... because the Wall Street investor community isn't buying this hide behind the stack of back orders and NDAs story any longer.

If Microvision management got something of substance, then come out with it and tell the Wall Street investors what the heck they have been doing all these years to make any money.

Business is about making money; to pay the bills and then some to show profit. It’s about time they get-on with the business... other wise they would be back to the "pawn shops" to raise more money and last a few more Qtrs to sing the "squint disease" bird song.


Disclaimer: These comments are author’s personal observations and opinions and are based on his own research conducted recently.