In order to keep some balance to the good news that is on this board the following article provides a little balance to all the optimism of the longs.
As some of you may remember I was a short, covered at a loss and now I am a lurker on this thread. Seems to me that this stock would be a gold mine for a trader as it goes from the high 20's to the teens, to the high 20's to the teens, etc.
With there cash, and low burn rate, REFR can outlast most shorts IMO and cause some longs to become frustrated. I am not having more fun just watching.
>>Past the Looking Glass at Research Frontiers
By Adam Lashinsky
Silicon Valley Columnist
Originally posted at 4:12 PM ET 5/30/01 on RealMoney.com
Research Frontiers (REFR:Nasdaq - news) of Woodbury, N.Y., has been around since 1965 and has been publicly traded since 1986. It has just 13 employees. It produces more press releases than products, paid its chief executive $836,000 in salary and bonus last year and has signed much-ballyhooed technology licensing agreements with major corporations including General Electric, Polaroid and Material Sciences.
And yet, after more than 35 years in business, the company has yet to make a profit. Indeed, according to its recent securities filings, "to date, no licensed products have been sold under any of the company's license agreements." You'd think a company like that might be struggling.
Instead, Research Frontiers says one of its partners, a Korean manufacturer called Hankuk Glass Industries, is close to commercializing its technology for so-called smart windows. Probably as a result, shares of Research Frontiers -- which its message-board cult followers like to call "Reefer," after its stock ticker -- have more than doubled in value since early March. At Tuesday's close of $28.02, the company that exists only to exploit its 360 patents is worth $339 million.
REFR Madness
Investors have fallen in love again
with shares of Research Frontiers
If it seems like an easy short, it isn't, although its short position, at 900,000 shares, is about 13 times its average daily trading volume. Real companies have looked at Research Frontiers' technology and profess an interest in using it -- if it's ever available in sufficient quantity. But neither is Research Frontiers is a home run. Its No. 2 executive, Executive Vice President Joseph Harary, acknowledges that "up until recently we were a story stock," adding that there's always been a "piece missing," mainly large-scale production of products using its technology.
Research Frontiers doesn't smell like roses, if the sniff test is the requirement for a plummeting concept stock. If licensees continue to sit on their hands and its Korean partner doesn't live up to its plans, its opportunity likely will dwindle. But for the investor that needs a smoking gun, there isn't one here either.
The Research Frontiers story begins long before CEO Robert Saxe founded the company. It goes back to Polaroid founder Edwin Land, who developed technology that would control the amount of light that passes through glass. Focusing instead on self-developing film, Land let his other patents expire. Saxe picked them up and developed them into technology for suspended particle devices, or smart glass, which, theoretically, has numerous applications. These include dimming the windows of aircraft, improving on tints for sunglasses and placing digitally controlled tinted windows in automobiles, homes and office buildings.
Some sing the company's praises. Alex Martinez, director of sales for InspecTech Aero Service, a privately held maker of aircraft replacement windows in Fort Lauderdale, Fla., says the technology could be used by airplane passengers to dim their windows. He says he showed a mock-up to a technical employee of one of the biggest U.S. carriers. "Their engineer told us, 'Don't show this to marketing yet. They're going to have a field day.' "
Bigger companies are less impressed.
Robert Mataya, vice president of planning and development for Material Sciences in Elk Grove Village, Ill., says that light-dimming technology could work well with the company's existing product line of solar-controlled window films for commercial applications. But Material Sciences investigated the Research Frontiers materials three to four years ago with "limited success." Says Mataya, "We really haven't done much of anything with it in the last year, year and a half." Still, Material Sciences appears as a licensee in every press release Research Frontiers issues.
It's a similar situation at Polaroid, whose chief patent counsel, Ed Roman, reports that the Cambridge, Mass., company continues to investigate the technology. Jim TerBeest, chief financial officer for home-replacement window maker ThermoView Industries in Louisville, Ky., says "it's a little bit early" for his company to consider practical uses for the Research Frontiers technology.
Research Frontiers' Harary says it's normal that there would be an ebb and flow for the licensees' level of activity. He says that when Hankuk begins production at its new factory later this year, other licensees will begin paying attention again. He suggests that if the company's licensees can produce smart-window technology for just 1% of the 37 billion square feet of glass produced each year, at about a dollar per square foot in royalties, Research Frontiers could see $370 million in earnings. "And that's just one application." He defends the numerous press releases Research Frontiers issues by explaining that "as a company whose main business is licensing, every time we enter into a licensing agreement we have to disclose it."
The company thinks its stock is cheap. Never mind that it doesn't have enough cash to cover the 500,000-share buyback it recently announced. Harary says Research Frontiers easily could raise more capital if necessary.
Harary notes that TheStreet.com columnist John Rubino once compared Research Frontiers with Qualcomm (QCOM:Nasdaq - news), another company that was valued more for its patents than its revenue. A more recent stock-market disaster comes to mind as a cautionary tale: memory-chip technology licenser Rambus (RMBS:Nasdaq - news). << |
