EMA analyst's report. I have been doing DD. So far,so GREAT! :
phone: 800-759-3343 The Barrington Group H0051 8619
NW 68th Street Miami, FL 33166 March 17, 2000
INITIAL Coverage - BUY- SPEC eMagin Corporation
(EMA/AMEX) Shares Outstanding (mil.) - 27.3 eMagin
Corporation was established privately seven years ago as
FED Corp. It has won exceptional industry recognition
with regards to expertise and patent protection in virtual
imaging processes and micro-display technology for
high-resolution text, data and video. In 1998 the company
licensed important Eastman Kodak patents in OLED
technology (Organic Light Emitting Diodes) for optically
enhanced micro-display applications. This revolutionary
technology was developed in the late-80s by Kodak and is
just finding its critical economic applications. eMagin and
its wholly owned subsidiary, Virtual Vision, have enhanced
and extended Kodak's work with a knowledge-based
library evidenced by more than 150 patents issued,
pending and in application. We expect multiple products
and new industries related to wireless to be developed
from this company's growing business. Due to their lead
role in the high-growth micro-display, semi-conductor
market, IBM, Kodak, Motorola, Sony, Lucky Goldstar,
Sega, Nokia, Siemens among others have ongoing
co-development or partnership with this still small,
outstanding high-tech company. "After more than 15 years
as the center of the computing universe, the PC is about to
give way to a new breed of hand-held and embedded
devices that will dramatically change the way people
communicate and share information." - Dr. Paul M. Horn,
Sr. VP, IBM
"The future is not PC-centric. It's mobile phone-centric."
Mr. Jorma Ollila - CEO Nokia - March 3, 2000
"PCs will be fourth. Mobile phones, TV sets, game
machines and then the PC as a way to access the Internet."
Mr. Andy Green - Group Director British Telecom -
March 4, 2000
"beginning in 2001 OLEDs will usurp market share from
VFDs across the board in audio, video and consumer
appliances." Stanford Resources
Investment Opinion We are initiating coverage of eMagin
Corporation (Symbol EMA, American Stock Exchange)
with a rating of BUY-Speculative based on the following:
1. The company's strong position as the market leader in a
dynamic field - OLED on silicon-based Micro-display
technology. 2. A core, committed, blue-chip investor group
lead by Citigroup and Eastman Kodak among others. 3.
The "enabling" nature of this technology to grow new
products and whole new product categories in the internet
appliance and wireless sectors. 4. The significant
cash-flows to be derived from OEM relationships with
most major electronic, PC and phone consumer brands. 5.
The ability of OLED on silicon ICs (integrated circuits) to
become a total solution to the miniaturization and
wearability of PCs. As a private company, eMagin raised
$59 million from astute high-tech investors like Eastman
Kodak, Scudder, CitiGroup,, Montgomery Asset
Management, Exeter Capital and Lucky Goldstar. They
recognized the company's technological lead early. Besides
designing the video headset equipment for NASA's space
shuttle program, eMagin demonstrated the world's first
OLED on poly-silicon with more than 300,000 pixels; the
first OLED on silicon IC-VGA video; the first up-emitting,
full-color OLED video and the brightest white OLED ever
recorded. The company's technology uniquely permits
millions of individual low-voltage light sources to be built on
low-cost silicon ICs to produce full color over a long life.
They are recognized leaders in micro-display and personal
viewing systems. Technology Leader The company is a
leader in OLED (Organic Light Emitting Diode) display
and optic technology. In the mid-1990s they licensed
patented technology from Kodak for optically enhanced
micro-display applications for this science. The core
technology and eMagin's proprietary knowledge base
provide a strong barrier-to-entry to would be competitors.
eMagin has added considerable know-how and
proprietary ergonomic and optic patent protection to the
original work by Kodak. Importantly, the patents cover
"up-emitting structures on opaque substrates," which we
believe is critical for the existence of high-performance
OLED micro-displays. It is important to note that Kodak
also negotiated an equity position in eMagin at the time it
granted the licenses. Markets and Enabled Markets We
are convinced that OLED's improvements in micro-display
price and performance will unleash a multitude of new
web-appliances. Most of the technology for
voice-activated, wearable computers is available. We
believe that eMagin's work on high-resolution,
HDTV-quality video displays, measuring less than ó" per
side and viewed through lightweight optics, has the best
chance for growing this market from nearly zero today to
over $1 billion within four years. Eye fatigue, power
consumption and field-of-view (FOV) issues cannot be
overcome by current LCD technology because of the
physical limitations of the material itself. A "disruptive"
technology, OLED on silicon is expected to revolutionize
whole categories from digital camera viewers to "smart"
cell phones to PDAs to personal entertainment viewers to
second or third virtual displays for PCs and Notebooks.
As a strategic custom chip, the eMagin display is capable
of incorporating all of the major parts of a PC, in effect,
potentially becoming the PC itself. We believe this
possibility alone justifies a strong speculative stance on the
security, as a market capitalization of $2 - 3 billion would
not be unwarranted should early results prove promising in
2001. Product Timetable and Capitalization We currently
project the company will introduce XGA+ display ICs in
mid-2001, and we anticipate the production of SVGA+
micro-displays late next year. In this format, eMagin's
optically-enhanced displays will provide unparalleled high
resolution viewing and comfort. Company shareholders
injected $59 million while the company was private.
CitiGroup, which has proven itself to be an astute,
early-stage technology investor, and is the world's largest
financial organization, is the single largest shareholder. A
wholly owned subsidiary, Virtual Vision, of Redmond,
WA, holds many patents related to comfort and optic
issues, and is a recognized leader in the ergonomics of
wearable head-display units. Lightweight glasses are likely
to carry the eMagin micro-displays seated directly on
silicon chips which, in themselves, are complex ICs
(integrated circuits) that can be also carry all the circuitry
and linkage of a complete, highly-evolved PC. Strategic
Successful Business Model The business plan is modeled
on Vitesse Semiconductor's (VTSS) success strategy with
specialty ICs. Their strategy enabled large segments of the
telecommunications industry through the active use of
OEM (Original Equipment Manufacturers) partnerships
based on their unique gallium-arsenide chip technology.
That company has achieved a current market capitalization
of $13 Billion, up from $150 Million less than 5 years ago
(a return of more than 75:1), and is still one of the fastest
growing companies in the world. We believe an
exceptionally capable management team, drawn from
industry leaders, has been assembled by the company to
carry out this ambitious plan based on the Vitesse model.
Management Mr. Gary Jones: President Current Chairman
of the Technology Committee of the US Display
Consortium. Purdue University graduate: Electrical
Engineering. Before 1992: 9 years Texas Instruments.
Credited with multiple patents and semiconductor
processes. Instrumental in development at Raleigh-Durham
Triangle Park in North Carolina. Mr. Clive Barton: Chief
Operations Officer Masters in Applied Physics at the
Institute of Physics in London. 30 years senior level
experience. Formerly, President of Cypress
Semiconductor with senior postings at Advanced Micro
Devices and Honeywell. Ms. Susan Jones: Exec VP Noted
Lamar University chemist credited with significant patents
in the semiconductor and materials fields. Previously, senior
positions at Texas Instruments. Mr. K. C. Park:
VP/International Operations Previously he was Executive
VP at LG Electronics credited with establishing major
profitable alliances and partnerships with multi-national
corporations. He holds a Ph. D. from the University of
Minnesota, an MS from MIT, and an MBA from NYU. At
IBM for 27 years, he managed the flat panel display and
semiconductor programs at the Watson Research Center.
Dr. Webster Howard: VP/Technology Masters and
Doctorate at Harvard in Physics. Joined IBM in 1961 and
was a member of the prestigious IBM Academy of
Technology. In 1993 he joined AT&T as director in the
High-Resolution Technologies division. He is the President
of the Society for Information Display. Mr. Richard J.
Haug: VP/Display Manufacturing Operations A Duke
MBA who previously managed DRAM operations for
Texas Instruments in Houston, and was Director for
support operations at RCA's IC facility in Sommerville,
NJ. He was part of the team that merged RCA with GE
Research at Triangle Park in North Carolina. The company
intends to leverage preexisting co-development, investment
and customer relationships with Sony, IBM, Sega,
Olympus, Siemens, Kodak, Lucky Goldstar, LG, Nokia
and other OEMs to enhance multiple new consumer
products that the wireless revolution is spawning and, more
importantly, that the high-performance, low-cost eMagin
semiconductors and displays will enable. For example: 1.
The mobile workplace will enjoy growing demand for ever
larger virtual displays instead on the small displays that now
appear on appliances such as those used by UPS
employees and industrial technicians. Demand is expected
to increase for wireless video from the maintenance,
manufacturing and medical industries for "remote expert"
review and easier operation of tools including those used in
procedures as diverse as colonoscopy and hazardous
materials handling.
2. We believe that a "Dick Tracy" wristwatch and the
"smart-cards" being developed by multiple OEMs and
enabled with miniature PCs with built-in communications
accessories, become technologically and economically
feasible only with eMagin's OLED technology.
3. Voice-activated, wearable PCs and virtual reality,
HDTV-quality gaming and entertainment viewers can
become viable products with the low-power consuming,
high-data capabilities of OLED on silicon. Existing
Relationships with High-Tech Leaders eMagin currently
partners with Sony, IBM, LG, Motorola, Seiko, Nokia,
Lucent, Olympus, Lucky Goldstar, among other key OEM
relationships. The company has over $100 Million of
high-tech manufacturing equipment at the IBM facility
where it is headquartered. The financial bar-to-entry for a
serious competitor is quite significant. At this stage, we
believe it would require minimum startup capital of $300
Million and four to seven years to match eMagin's position
today. Even at this, the competitor would have to acquire
licensing for the technology from Kodak or eMagin, or
develop a whole new science and attendant
knowledge-base. In addition, in 4-7 years, we anticipate
eMagin will be at least two major technological stages
ahead and have much solidified its position as market
leader. Furthermore, we believe the existing long-term
lease with IBM represents a strong competitive advantage
for eMagin. We believe the risks for eMagin are normal
business, financial and manufacturing risks associated with
sophisticated chip design, development and manufacture
encountered by companies like Intel, AMD and
Broadcom. Financial Projections We project
$140,000,000 to 190,000,000 in revenues for eMagin in
2003. Of this, we expect to see $25 million to $40 million
to accrue to the bottom line. We believe the wide ranges
are appropriate given the early stage of manufacturing that
the company is currently entering. We believe the
company's ability to far outperform these numbers should
not be underestimated by investors with a tolerance for risk
and the price volatility that this security will surely
engender. Closing Comments As a potential leader in what
portends to be the single strongest industry over the next
decade - Wireless - eMagin could become the Intel of that
age. While we would not invest with that expectation, the
possibility exists. It's a given that demand for
micro-displays must grow dramatically for all "Internet
appliances," phones, game sets, watches, smart cards or
PDAs no matter who "wins" the race. History ensures that
any and all data and information that can be displayed will
be displayed, and the need for miniaturization will grow as
the desire to be free from the desk and receive information
and audio/visual information anywhere grows. We will be
updating this initial coverage in 4 to 8 weeks. Attention is
called to additional research sites at
www.eMaginCorp.com and www.VirtualVision.com.
Copyright ¸ 2000 by Investfacts |
