MVIS ASM September 2009 notes
Microvision Annual Meeting of Shareholders September 15, 2009
CAVEAT
I am human. Mistakes will be made. The SEC and Investor Relations are the bastions of truth. So, feel free to correct me, ask them, or better yet, do all of that and then ask the other attendees what they think. Multiple points of view, a diversity of opinion. Good stuff.
PRE-MEETING (MVIS = $3.63)
Ah, demos, the main reason for showing up early to the MVIS ASM. This year was different. There were a few ShowWXs, Microvision's pico projector, back in a darkened room as before, a kit (the PEK) for developers interested in building prototypes around Microvision's display engine, and a automobile head up display (Auto HUD). There were no bar code scanners, eyewear models, cell phone mockups, military apps, or medical devices.
The ShowWx demos were similar to previous years, but the demos were all driven by independent units, no more mystery cables running out the back and into a curtained shelf or enclosure. I thought the displays were dimmer. A friend thought they were brighter. They probably hadn't changed. The displays were as good as ever.
We'd been disappointed when we first arrived because there hadn't been a product launch; then, one of us overheard that the official product launch had just been announced. He pulled it up on his iPhone and we clustered around to read the tiny text. But, aha!, we are in the midst of pico projectors. Lets just hook one up and display this large so all can read it. No such luck. The iPhone would port out video and such but not a conventional web display. It was a business choice at Apple, not a decision made by Microvision. Ironies abound.
The microHUD looked good, particularly its reduced size from last year. Evidently it is about 2.5 times smaller than the existing competition, though Microvision's device won't be available for a few years, so the competitors can continue to improve too.
The Microvision employees and management team were open and friendly, and listened to suggestions about how they could have done the launch better:
> have side-by-side comparisons with the competitor's products
> have paper copies of the announcement or a ShowWX displaying the release
> make more of a show of it with banners, etc. rather than having attendees scrounge for information from the web while standing in the dark.
The units worked well, were fairly intuitive, only a little warm, and didn't start to run out of power until after the main meeting. The units had some unfortunate customized features like special cables and such, but those will be variable depending on whether they are Microvision products or OEM products.
As the meeting started, almost all of the seats (~150) were filled and then they added a row. There were still a couple of dozen folks standing in back.
OFFICIAL MEETING (pulled out of chronological context for simplicity)
Everything passed with large margins. Sounds like some non-US elections I've heard of.
BUSINESS PRESENTATION
The CEO thanked the stockholders for their support and confidence along the journey. The company is now transitioning from solely R&D to its first strategic product. The main hurdles have been technical reliability, supply chain development (e.g. green laser), and distribution. The distribution will be handled via three channels, international, direct from Microvision, and through branded partners (interesting imagery). They still see the embedded product as the bread-and-butter.
They made a fine inspirational video, that technically glitch-ed. The black bar in the middle of the screen made it look like they were blanking out the naughty bits of a risque video. Nice try. Oops.
They plan to go-to-market within the next few weeks. Today's product launch was not coupled with an opportunity to buy the product. That comes later.
Further product developments will be tethered/wireless (independent units), attached (like a thumb drive projector), and fully embedded (cell phone). Laptops and others were mentioned. This is just the tip of the iceberg.
Their schematic of the Asia Optical production line showed about 10 rows of about three stations per row.
Consumers want ease of use (infinite focus), the ability to read small text (WVGA - 8 font), in a thin unit that can be used with many devices.
(MVIS = $4.08)
The ShowWX will come out in one color, with a two hour battery life, and is intended for audiences of five or so.
The market is plentiful: 1.5B cell phones, laptops, iPod style devices, cameras, game systems. They don't know how much market share they will get. They'll probably be production limited for a while. As a comparison, cameras in cell phones went from nothing to 300 million units in 5 years.
Intellectual Property is emphasized. Microvision, especially since 2006 (when Tokman came in), has submitted enough patents to rank 20th globally in 2008, and 17th in 2009. There are more to come.
He summarized by saying that is has been quite a ride, and that for now, the strategy is based on PicoP.
QUESTIONS & ANSWERS (paraphrased for simplicity and because I couldn't catch everything)
? Alex Tokman intends to see this through and isn't there for the money.
? Instead of 2009 being a Super Bowl year, it is a play off year. Next year? Maybe.
? As of 2Q09, they had $26.3 million, which is sufficient to launch, but they'll need to raise more cash.
? Green laser supply is from two very conservative companies: Corning (September?) and Osram (January?). He wouldn't publicly addressed partners' yield issues.
? IP protection continues.
? Laser volume will be fully online in 2010 and when pressed he suggested rates of thousands per month in 2009, and tens of thousands per month in 2010.
? Embedded in 6-9 months after standalone is more like, "probably in time for Christmas 2010.
? Auto HUD is 1/4 the size, 1000 times the contrast of the competition. They are pursuing third market because the automakers are all worrying fuel economy.
? Wearables haven't been successful for any consumer market because none of them look good. Cost and size will improve, but until then the military is the main market. See the Lockheed contract.
? The bar code scanner was essentially a training ground that provided some cash. They are looking to sell off the inventory and maybe sell the product line.
(MVIS = $4.04)
? HDtv will be government first.
? Competitors are selling at $300-$600. Microvision will sell at a premium, with better battery life, laptop compatible, with better margins outside the US.
? The VIP customers (8,000) are competing with large corporations that may be willing to buy the entire inventory. Details to come.
? The excitement is about embedded devices. They are working on demo prototypes with cell phones, laptops, cameras. Something may come to market by Christmas 2010.
? Motorola relationship is strong but quiet (NDA).
? Motorola + Netflix makes sense because content is king.
? AAPL news? Be patient.
MY SUMMARY
(MVIS = $4.24)
The story continues to improve, but the credibility barely budges. There are too many little things that let me think the management team still doesn't understand the complete picture. The meeting was delayed until September, and yet there wasn't a product. There was a product launch, but there isn't anything to buy. The press release wasn't available and provided a great opportunity to show how such a notice could benefit from such a device. Imagine them walking in, each one with a ShowWX in hand, greeting a bunch of investors with an image displaying the product release, big and proud on any nearby surface. Auction one off on eBay with the proceeds going to some charity. Have one off to the side constantly displaying the stock price, etc., or pass it around during the meeting. We, the unpaid public, had no problem coming up with simple and inexpensive ideas that evidently hadn't been considered by the highly paid management team. That is not a comforting thought. They have demonstrated more credibility in terms of honesty and commitment, but I have a harder time believing that they can manage the image conscious aspects of selling such a disruptive display technology. There's another irony there.
As always, and it does seem like forever, they are constrained by non-disclosure agreements and such. It provides a screen for them to hide behind, whether from convenience or necessity. Others, newer to the company, probably haven't been trained into my level of doubt. Good. Fortunately, many such arrangements may soon find it convenient to be much more forthcoming, and probably will involve experienced image artists who will understand the importance of nuance and style when presenting a marvelous opportunity.
MY CONCLUSION
Of course, I am holding. This is the best year yet. I was able to hold during those previous years. Holding out a bit longer will take less effort, and with less doubt. We might even get to a meeting that's more like a real business where people talk about assets, liabilities, revenues and expenses. Gosh.
DISCLOSURE
LTBH since 2000, and finally willing to mention the company to friends again.
(MVIS = $ 4.20) |
