Dr. White, thanks for the enlightenment.
If anyone is really wondering why a very intelligent human being such as Dr White has given up on Fonix as a potential investment read the following statements and it should start to click. It makes perfect sense to me.
Fonix longs read this once and once again. Bob was looking for answers and trying to help. " Above all, do no harm" Great quote Dr. White.
I'd agree the fundamentals are better now than 6 months ago. Downside risk is less, simply because the stock is going for half the price. Upside potential is greater, based on the Siemens agreement and the additions of Obertueffer, OGI, and Kim. BUT - no-one else is standing still, either. LHSPF has a major deal with MSFT. IBM and Dragon's products are well-accepted and developing linkages as well. Other neural network products are on the market, all in the same 6 months. SO - if I had money to invest in ASR, where would I put it? - still in LHSPF. That was the right choice 6 months ago (doubled, while FONX halved), and it's still the right choice, IMO. It has diversified products, it has much better linkages (Siemens and OGI notwithstanding), it has a history of upside earnings surprises, and it has good management. With all that going for it, the only reason I'd buy FONX instead is IF 1) I was CONVINCED they had a lock on the technology that was going to win AND 2) I was impressed with their management's ability to execute for the shareholder. Needless to say, I don't believe either is the case.
So my question for you is, why don't you think LHSPF's upside potential is as good or better than FONX's? I can only imagine you saying that they could assume the same dominance as INTC or MSFT, but I emphasize again - INTC, MSFT, and CSCO got where they are through incredibly outstanding management. FONX does not have that - period. Even if Bill Gates or Andy Grove selected FONX's technology, you can bet FONX shareholders would do OK, but the stock and the technology will remain in the shadows of INTC or MSFT, and never get to their level. Just ask the folks who created Java - unquestionably a major, major development, used by everyone, yet still in the shadows of the big boys. So FONX's upside is NOT unlimited. They cannot write their own ticket. They do not have a monopoly, or nearly so. The patents clearly do not reserve the field of ASR via neural networks for FONX, even if that is the only way to go. They are and will always be dependent on partners, and playing second fiddle - and that's the best case scenario!
Well, I have now read the Business Week article, and have real trouble believing fonix has the Holy Grail, or an essential next step for ASR. It's obvious they have a saleable technology, but it looks like a bit player to me and to a whole bunch of other people who should know. It looks like there are many ways this technology could go in the next generation. It's not as simple as HMM hits its dead end, and fonix takes over; HMM will go for awhile, and several technologies will vie for utilization in the next generation. If the entire market is $1 billion in 2000, as the article says, no way will fonix earn $1.00/share, even by then.
How has my research lapsed and become obsolete, when I was commenting on a Business Week article from a few days ago? What has happened in the last couple days that the authors of that article, and those who were interviewed, were unaware of?
FACT is, fonix does not look like "the Holy Grail" OR the "human computer interface leader" to anyone outside of the company and a few bullish, non-ASR expert investors. What facts am I missing, and how are my opinions less valid than these clearly hyped claims of the company?
I have always remained open to the possibility that the company would generate revenues, I've just been very skeptical that they would be sufficient to drive the stock price to any reasonable multiples of where it is now within the next few years. The Siemens deal fits into what I've been thinking and expressing here for some time - fonix has SOMETHING, but I don't think it's nearly as earth-shaking as the company and some of the bulls claim, and I don't think management will execute for the shareholders benefit the way they should, even if they did have the Holy Grail.
I have a little problem with you and Randy criticizing the research efforts of the opposing views. Financial data is a crucial part of research, and I don't know anyone who has done it better than John Harris. Figuring out the entire ASR field and how fonix might fit into it is crucial, and I don't know anyone on this thread who has researched it any more than I have. Furthermore, I have asked questions bull should have been able to answer - i.e., is fonix's hiring of new software engineers an increase in staff, or because of turnover? How do fonix's patents compare to other neural network ASR products out there? And no-one has answered me. So the extent of research on the part of the bulls appears to be primarily talking to people at fonix, Siemens and related entities and taking their word for things, for the most part. That's not unimportant, but it's not dazzling research, either.
The fact is that none of us can assess the technology, because fonix won't (or can't) demonstrate anything that works very well to the public. So the best we can do is evaluate where this technology might fit into the move to ASR ("skate to where the puck is going to be"), and figure how fonx might fit into that picture. Then we evaluate management, and see how well we think they might execute those opportunities. After that, we're down to opinion, and our level of risk/reward investment decisions. I can accept that you and others have a different opinion and different risk/reward profile, but please don't denigrate the level of effort that some of us have put into trying to understand this company, its product, its management, and its place in the field of ASR by saying we haven't done good research, or that it's out of date.
I haven't called Siemens or OGI, I've gone with what I can find in print. I have become very suspicious of what anyone says about an investment, if they're not willing to put it in writing. I have read Obertueffer's journal, in an attempt to get that perspective on fonix. I'm not totally opposed to talking to someone inside the company and if I was just about ready to put my money on the line but had a few questions left, I would sometimes do that. But if what I find in writing causes me to be concerned about a company, nothing someone told me on the phone would be sufficient to get me to invest. There's too many good companies out there to invest in; I don't have to let the reassurance of a stranger become a deciding factor for me.
I don't mean to downplay Siemens as a company, they're a great company, but I do question the level of their commitment to fonix. I just do not consider a few million dollars much of a commitment for a multibillion dollar company. I know others see it differently.
What would it take for me to invest in fonix? 1) A great product (preferably several), dominant or with the potential to become dominant in its sector; and 2) good, if not great management. I think that's what I've been saying for awhile now, not just when fonix began to show revenues.
Good luck to you and all the fonix longs, too. I will not be hurt if this stock goes to the moon. At this point, its just an education for me, and the interaction with all of you is part of the educational process for me.
Thanks for the info on low turnover at fonix - I don't believe anyone gave me that answer to my question when it was posed earlier. No, I didn't go to the bother of calling fonix to confirm that myself at the time - I surely thought people who were long on the stock would be motivated to do so.
"Siemens recent actions seem to indicate they were impressed with something" - impressed enough to use it, yes - and I've always been open to that possibility. Impressed enough to pay big bucks for it? - not to my way of thinking.
"Can't fonix co-exist with many other VSR companies?" Sure, and I've been open to that possibility, too. But I'm going to TRY to put my money on the company(s) that will be the leaders. If I was convinced that fonix was not going to survive, I would be shorting it, and I have clearly not done so.
As to your impression that I used to seem more objective, maybe it seemed that way when I was arguing with Mr. Pink. But the fact is, I have consistently said that I accepted the possibility that fonix had a saleable product, I just doubted that they could generate sufficient earnings to make this stock a big winner, which it had to be, in my book, to justify the risk. I've had concerns about the exclusivity of the patents for quite awhile (see post #1033, Aug. 5). You and I debated the size of potential revenues back in August, too. See post #1105 - I think that says almost precisely then what I'm saying now. While you're back there, look at the rest of my posts from that time frame, and tell me how you think my outlook has changed. For the moment, I still think the only successful investment strategy for this stock has been one you proposed, I believe, to trade in and out, and it still looks that way to me.
Hans,
<Fonix is after all the only cure for the Hidden Markov Model Blues..., or am I wrong?>
I think you're wrong. It's possible that it's A cure, but it's not even the only neural network system for VR, so it can't be the only cure. Nor has it been shown that the "HMM Blues" is anything more than a bump in the road, so there may be a variety of other ways to get past it.
Here's another company using neural networks for speech recognition. If you cruise around their web site, you'll find they've got products on the market, have received awards, etc. What is it that makes fonix's product superior to theirs? Or if it's not superior, what is it that makes one confident that fonix will become the market leader?
sensoryinc.com
The fact that I (financially neutral on the stock) didn't make the calls simply means I may have missed an investment opportunity. The fact that those long on the stock apparently didn't have those answers (and apparently still don't, with respect to the exclusivity of the patents) is a more serious hazard to the health of their investment, it seems to me.
Well, folks, its time for me to move on. I have truly enjoyed and learned from the dialogue here. I've become convinced, however, that I won't be investing in (or shorting) this stock for the forseeable future, so I'll be dropping this bookmark, though I'll still be on SI, if anyone cares to track me down.
My reasons are several, and probably boring to all by now, but I'll summarize them here, if only for closure for myself!
I think this company is a lot like a biotech, which is a little more familiar ground to me. It has a bunch of scientists, searching for the answer to a problem. No-one knows if they'll actually find it before everyone else also doing similar research, so valuing such a company becomes problematic. A typical approach is to multiply the R&D budget by some factor, and then fudge up or down based on whether you think their current is research is extremely promising, how well you like management, alliances formed with bigger companies, etc. On this basis, fonix was still overvalued at $3, and wouldn't be a buy until it got to $1 or so. If that seems extremely low compared to other biotechs, just remember how many shares are outstanding, most in the hands of management. Even when it gets to be a good value (at $1 or so), you still have to trust management to take the right steps for shareholder value, and you still have to believe there's a good potential to be a market leader. I have very little confidence in either possibility.
So its time to move on. Fonix may hit it big time; it won't be the first time I've been wrong! It just seems there are more productive places to spend my time and money at this point, so that's what I'm gonna do. Thanks again to all for an enjoyable and worthwhile discussion!
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