ASM NOTES - long
The following are my notes from the Microvision stockholder’s meeting that was held today. I was glad to see other folks like ourselves there. Hopefully they will point out anything that I get wrong or incomplete.
Microvision Annual Stockholder’s meeting notes for FY2000
The meeting was held in the same place as last year. As usual there were a bunch demo units available. They can be interesting enough in their own right. This year’s bunch seemed to be much better developed. There was the Nomad system, the small bar code scanner named Flic, the full color display called Spectrum, the helmet display system which I think is for the helicopter application, and maybe a couple of other units. I was glad to see the improvement from the prototype Nomad system to the production Nomad system. The headset is more ergonomic by being lighter and a bit nicer looking.
The room looked like it could hold about 300 people and seemed to be less than half full. About 88% of the shares were represented at the meeting.
FORMAL ASPECTS
The meeting started and ended with the formal parts. Suffice it to say that the legalities were followed and everything passed. As an aside the CEO pointed out that as things are now coming out of the lab the internal excitement level is high.
COMPANY DISCUSSION
The motto or slogan of “Information in the form of light” took some explanation. The CEO drew a parallel between the pervasive impact that the micro-electronics had on the last half of the last century and projected that micro-photonics will drive the first half of the new century. Optical technologies are the beginning of the swell of the next wave. Both technologies can be broadly enabling, disruptive, and creating lasting value. The term disruptive, in a good sense, was used frequently throughout the presentations. The CEO’s goal of the meeting was to leave folks with the clear sense of how Microvision is uniquely competitive in this arena.
In the microscanning technology, which encompasses the information in stuff like displays and the information out stuff like bar code readers, the CEO stated that Microvision is unique on the planet. The uniqueness stems from the simplicity of the technology. Most of the display competitors are using individual display units for each pixel. To get high quality images in a small display this means creating lots of very tiny devices that have to be hooked up, checked and reliable. In some displays this translates into 480,000 pixels that are 10 microns across. In comparison, Microvision only has to make one unit, a mirror, that is a full millimeter across. I think he said that this equates to a 16 fold improvement in production but I can’t remember if it was production yields, costs, or something else. The units are also much easier to test and work with.
The Intellectual Property scorecard is now up to 34 patents, with 81 pending and 164 documented as invention disclosures. This is evidently a competitive barrier.
He emphasized that all of this equates into revenue, profit and incredible wealth for stockholders. I think this is where that “forward looking statement” wording comes into play.
PATH TO COMMERCIALIZATION
Next up was a new guy at the company, Tom Sanko. I think he is VP of Marketing but I am not sure about his exact title. I’ll be happy if I just got his name right. He has evidently been hired in for the step between the lab work and a product being delivered to market.
He started off with a product pipeline story. The pieces that I caught were: Nomad has a number of launch customers and should be out in the fourth quarter of this year, Spectrum is out now in a hybrid prototype/production stage, and the bar code scanner named Flic is due out in the first quarter of next year.
Nomad is being positioned as an enterprise productivity tool for tasks that are currently difficult or expensive. As such it should increase a customer’s profits by reducing their expenses. It should pay for itself quickly. It is being targeted to 1) medical areas like surgery and improving nurses processing, 2) industrial for maintenance and repair stuff as well as getting workers out of control rooms and back near the machines for better monitoring I guess, and 3) the Defense and Aerospace arena for Air traffic control, head up displays (both military and civilian). Currently the unit price is $11,000 without a computer or $15,000 with a wearable computer, though the prices sound like they are negotiable based on the size of orders and such. It sounds expensive until compared against the cost savings it can potentially generate. While the ergonomics have improved, there are still improvements to come like a version that works with a hardhat. Once the product has some demo cost improvement data behind it, it should be easier to sell.
Spectrum is for those applications that require color. It is being called on for medical applications at this point. I think he said that there would be more to say once some trials were completed.
Flic is a simple bar code scanner which may not sound much but it is expected to be priced at about $50 and replace units that cost hundreds or thousands of dollars. If it succeeds it sounds like it will be a good example of disruptive competition. Luckily in that case it will be in Microvision’s favor.
In the microdisplay arena there is a lot of potential for the Microvision technology in the automotive industry. Because it is bright, reliable and cheap, it beats out a lot of the other technologies for head up displays in cars. It seemed like there was also a press release a while back about even helping with things like redesigning side view mirrors which I hear are a major hassle for car designers. In either case I like the line that this would provide the car designers with a “clean canvas for a dashboard”. I think he also said it might allow drivers to reconfigure the dashboard display on their own.
The helicopter helmet mounted display was also mentioned. It will be demonstrated in flight within three years and in production by the end of the decade.
COMPANY PRESENTATION CONTINUED
The CEO stepped back up and added a few items. They are looking forward to creating momentum and breadth. The breadth is the potential creator of multiple revenue streams.
A lot of the potential is in the improvement in productivity for the customer. When they buy the unit it will help them in their life and decrease their costs if they are a business. He referred back to Tom in mentioning that it is important to pick the right customers to get things rolling as some customers are more comfortable in keeping their minds open to positive disruption of their processes.
Stryker sounds like it will also have some good news but he couldn’t say much else about it.
One of the Flic applications is to have scanners incorporated into employee badges. I didn’t see the unit or quite understand the application.
LUMERA
The CEO continued with the description of the other major technology venture which is the work being done with electro-optical polymers. The first main application is the production of high speed modulators for use in optical communications. Without a modulator, there is nothing but a bright laser shining down a bit of fiber optics. So where there are optical communications going on there is a mission critical modulator right up front. The system can’t work faster than the modulator so the modulator has to be fast. I don’t know the industry standards but the two units discussed where 10 Gps and 40 Gps. Gps must mean something to someone out there. I get the impression that the majority of the modulators out there run much slower than that and are limited by the materials involved. Microvision is working with materials developed at the University of Washington and has special rights to the technology. The materials are good for their low voltage abilities (and requirements?), their high potential speeds, and their good thermal stability.
Microvision owns 58% of Lumera and their $2,400,000 stake is considered to be worth $51,000,000. I guess this is based on the most recent financing arrangement. Cisco’s recent investment in Lumera may have helped establish that valuation. They are currently in a 10,600 square foot facility and employing about 20 people. There is a lab and evidently some good fortune has meant that the facility can also act as a mini-production facility.
The 10 Gps unit is expected to price out at about $2,000 and the 40 Gps unit at about $12,000 though that will probably drop to about $5,000 by 2004. There is evidently a lot of pent up demand. The total number of units may be about 100,000 annually with a price mix that averages out to $3,000 per unit. If I got that right (and someone who attended please check me on this) that means $300,000,000 per year in revenue. There is a figure of $3.4B by 2004 here in my notes but I don’t know if that is cumulative, total market, MVIS’ portion, or a slip of my pen.
Some prototype work is expected by the fourth quarter of this year with the product going commercial as early as next year.
STOCK PRICE
The CEO quickly mentioned that the technical analysis of the stock suggests that the stock has performed better than 85% of the market over the last 13 weeks. He also pointed out that long term investing is still the way to go.
QUESTIONS & ANSWERS
Most of the following are paraphrased. The questions were from the audience and had to be submitted on slips of paper. No questions were asked verbally from the floor.
 The directors were introduced. Nothing astonishing here.
 Further share dilution prior to the company becoming cash flow positive is probable so they don’t under invest in an important product. The last time they raised cash was when the stock was at $50.
 Head and eye tracking with VRD is possible. Stryker is doing head and instrument tracking. GPS tracking is also possible.
 For it’s $25,000,000 Cisco gets an equity investment. They are driving to production in 2002. The exit strategy is for an IPO with shares distributed to MVIS stockholders. There is little or no downside risk to Microvision.
 The time for the burn rate to get to zero cash is middle or the end of 2002. They are actively talking with investment banks and expect to be able to pick their timing for the next financing. The share price may recover as more good news reaches the public and the market may improve in general.
The meeting was closed with the counting of the ballots. Everything passed.
MY OBSERVATIONS
This seems to be the key time when a lot of the arguments can be settled. There has been some debate about whether Microvision can ever get passed the prototype phase. The next few months will be testing that. If things turn out well I will be quite pleased and the people working there will be swamped with even more work. One of the employees mentioned that they have a hard time keeping up with the imaginative uses that their potential customers keep coming up with. Another one pointed out that there is enough buzz about the company that they might not have to advertise. Truly significant and important ideas act like that. The execution is what is important. I believe in the technology and look forward to the commercialization of the product. I will keep an eye on it though as things can happen fast at this stage.
If nothing else the other folks from some of the discussion boards were nice to meet and talk to. I am glad that we don’t all have the same picture of the company. It made for a more interesting discussion. Thanks to Rob for getting a bunch of us together before the event.
DISCLAIMER
About us, we invest for the long term but I have only held the stock for about 18 months now. I think I have enough. If the stock goes down I had too much. If the stock goes up I didn’t have enough. That is probably about right.
About my notes, well I do what I can but I am not surprised if I make mistakes. There were some other people there who know much more about all of this: the other discussion board folks and of course the official word available from the new guy at Investor Relations (what happened to Holly Ash?)
Fire questions my way if you feel like it. |
