A question for Pat Mudge (or two):
Now there is a name that I remember from the days of Amati. You were one of the champions for the upstart companies working on xDSL, and for Amati in particular, if I remember correctly. Age and the passage of time being such that I may be incorrect in my memory.
In any event, with the image in my mind of you as that of the high-tech, informed investor, I found the recent dialogue between you and Don Johnstone to be somewhat inconsistent with my image of you, and the type of investor I thought you were.
However, I notice that you were responding to a request for information about Lumenon from some friends, so perhaps the burden of being a high-tech guru is clouding your ability to see the possibilities of this upstart company, unlike your previous proclivity for another upstart, Amati.
In fact, both of these companies share some similar traits (although I would imagine they have their differences also) in that both were the product of great teachers from great universities. Both Amati and Lumenon, in my opinion, were trendsetters in their industry.
Of Lumenon in particular, it is a company founded on the intellect and work of two renowned scientists, Drs. Iraj Najafi and Mark Andrews. According to my research both are accepted leaders in their respective fields, i.e., optics for Najafi, and chemistry, particularly sol-gel, for Andrews.
With dream in hand (but little savvy in the world of business, and especially in starting and bringing a company public), they found a listener in Molex. At the time Lumenon was very cheap, less than $1 a share, very speculative, but also very promising (at least what the founders thought they could do was promising). So Molex bit, sure it wasn't for much money, pocket change for a multi-billion dollar company, but an investment that would further the development of Lumenon's dream: a photonic chip made using sol-gel and fairly inexpensive, off the shelf hardware common to the semiconductor industry.
Did Lumenon give away the house to Molex? Partly, but not completely. The founders still own enough shares to control their destiny, Molex now has a sizable stake in a company worth more than one billion dollars, and the launch of product is but a heart beat away. I find it comforting to know that Lumenon has constantly been able to tap Molex for funding as needed, and at increasing dollar levels, in fact at one point Molex was paying $23 a share for stock, a far cry from their initial sub-$1 level. Lumenon has also been able to concentrate on the technology and production techniques without having to worry about marketing since Molex gets everything for one year (well everything they have jointly developed). I note your concern that the agreement allows Molex the right of first refusal for an additional three years. While that is true, it is at then current market prices so the impact on Lumenon?s sales totals will be minimal. Personally I doubt that Molex will be able to handle either the volume or the diversity of chips that Lumenon should be able to produce at that point.
True, now that Lumenon sports a market cap that can cause nose-bleeds for some, there is a lot of second-guessing about the arrangement. However, that is primarily the result of investors realizing the Lumenon has grown so quickly in its technical expertise that they are, perhaps, even ahead of Molex's claim to fame, the packaging of the chips. Lumenon has developed an in-house pigtailing ability that will compete with its mentor, Molex. At this stage, it appears that Lumenon no longer truly needs the help of Molex. At least that is what I would like to believe. However, an agreement is an agreement and both sides appear to be living up to the contract.
So, Pat, my question for you is: Why can you not see the possibility that Lumenon may indeed be a winner? Its technology has produced DWDM chips that equal the specifications of its competitors, but at a much lower cost, with a process that allows for much simpler, and faster production than, say, flame hydrolysis deposition does. Lumenon's sales may be impacted for a year by the Molex agreement, but that is only a temporary blip. In fact, with the much larger, full-scale production facility coming on line in late 2000, it is possible that sales will be much larger (either to Molex, or others) than was originally forecast. This company has taken a tortuous route to being publicly held, but they are here, and they are debt-free, and they are basically a start-up company on the cusp of producing sales. Compared to other start-ups that have either gone public recently, or been acquired, I do not find Lumenon to be a totally unworthy investment. I consider it a prudent speculation. It is not every day that the ordinary investor is able to find such a potentially disruptive technology on sale at a reasonable price. We can?t all be private placement investors, but Lumenon has given many just such an opportunity in the open market place. |
